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Why does the exam cost so much?

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Why does the exam cost so much? [#permalink] New post 23 Oct 2010, 08:19
I can understand if it was like $80 or $60 or something like that because we need to pay the reading people for the AWA. But even then, assuming they're highly respect or whatever they should get paid like $80/hour and it doesn't even take them an hour to read 2 AWA's. So why is it $250? That's kind of absurd if you ask me. Seems like they just trying to hustle people for money or something.

Anyways, that's just my thought. Looking at the $250 come out of the bank doesn't sit well in my stomach. Especially for something that I might not even get what I want to get on it.

Thoughts? Opinions? Answers?
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Re: Why does the exam cost so much? [#permalink] New post 23 Oct 2010, 08:44
Because GMAC is a non profit organization :lol:
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Re: Why does the exam cost so much? [#permalink] New post 23 Oct 2010, 09:01
Boss its a business

Why does business school cost as much as it does ? ... same reasons

Its a business, and the right price is the price people are willing to pay.

If people would pay $300, then they should increase it to 300, good business sense would not have it any other way :d
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Re: Why does the exam cost so much? [#permalink] New post 23 Oct 2010, 09:10
Because without the GMAT you potentially can't apply to business schools (unless you think about the ultra elites which accept the GRE, but the GRE is by no means cheap either). And by getting into business school you can make loads more money than $250. So. There you go.
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Re: Why does the exam cost so much? [#permalink] New post 23 Oct 2010, 10:08
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Lets look at all the costs GMAC has to pay:
People to make the test questions
People to make & maintain the testing software, upkeep of algorithms, adding in questions etc
GMAC doesn't own Pearson Vue, so they have to pay them too.
People to read the essays.
I know I'm forgetting something.

I dont think they make a killing on the test. With all those expenses you could argue that $250 is a steal!
Where they make the money is sending those scores to other additional schools. Thats like an email but costs what $39?
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Re: Why does the exam cost so much? [#permalink] New post 23 Oct 2010, 10:36
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yep, already down $750 bucks with a 420 max score. YAY, crooks
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Re: Why does the exam cost so much? [#permalink] New post 23 Oct 2010, 19:14
crypto wrote:
yep, already down $750 bucks with a 420 max score. YAY, crooks


dogggggg i feel you on that. MADDDD crooks yo. Kudo's to that.
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Re: Why does the exam cost so much? [#permalink] New post 23 Oct 2010, 20:20
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I am not going to debate anything, (at this time at least) will just add a few interesting facts that may explain why the cost is high (not justify, just explain)
GMAC's Revenue:
GMAT is taken about 250K times per year. That's $62.5 million dollars in revenue. Take 3-5% off that off for banking and processing fees.

GMAC's Costs
1. Creating questions is expensive. I have heard from one source that one GMAT question costs upwards of $1K. I doubt the cost is that high but probably not small either since to license GRE questions, it costs $225 - 450 per question. (Strangely enough, it is only $5-10 to license an entire LSAT test). Go figure... But let's assume it does cost them $250-500 per question. If a CAT test requires 7.5 times the number of questions, that means you will need 585 questions per month; that's $125-250K per month to run the testing (potentially). This is just guessing. Annual cost is 2-3 million. Assuming More questions are needed for a CAT and a higher question price, this could be close to $12MM.

2. Test Center rental
The test runs for 3.5 hours and only 2-3 people can take the test per day, so probably it cost $50 per test for rental/space, etc
That's $12,500,000

3. Administrative cost
- Office Rental in McLean, VA (DC area - pretty expensive)
- Staff
I used to know this but don't remember the number of employees GMAC has. I thought it was close to 100

From GMAC's website about working at GMAC, I would assume this is the highest cost.

[quote2GMAC:]GMAC offers a superb work environment
•A collaborative, goal-oriented, diverse, and fun-loving culture
•Highly competitive compensation
•A truly exceptional benefits package
•Work life balance[/quote2]
4. Technology/Research
There are also costs of technology/website/administration/etc. This is probably small compared to the above


Bottom line - GMAC is a non-profit, so they are supposed to spend all they receive and it all probably goes on Travel/Staff/etc.
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Re: Why does the exam cost so much? [#permalink] New post 23 Oct 2010, 20:23
^ true. bb does have a good point on that.

but its still expensive haha. especially for a poor college student =( and I have to give it another go (sigh)
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Re: Why does the exam cost so much? [#permalink] New post 24 Oct 2010, 02:24
I think any attempt in justifying the high price is BS. They simply charge as much as they can as long as people continue taking it. As shrouded1 said, it's business.

The "non profit" thing is BS as well, it's pure marketing. And no they are not required to spend all the money they receive, it's just that they can't share what's left at the end of the year (unless laws in US are different from those in my country). Nothing prevents them from increasing their wages using the previous year's left over, and after a few years they could well pay themselves much more cash than purely mercantile-capitalist-evil firms.
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Re: Why does the exam cost so much? [#permalink] New post 26 Oct 2010, 02:20
shrouded1 wrote:
Boss its a business

Why does business school cost as much as it does ? ... same reasons

Its a business, and the right price is the price people are willing to pay.

If people would pay $300, then they should increase it to 300, good business sense would not have it any other way :d


I disagree with this especially about bschool costs too-much...actually sometimes b schools can't manage their operations from the fees they charge ...Schools need to spend a lot...Look at some points...

- Paying to regular faculty and even paying more to visiting faculty(or industry experts who come to give lectures )

- Huge amount of cost goes into creating infrastructure and maintaining it. (MIT just built E62 building for Sloan...from where these cost and money come...think!)

- Specific labs and learning centres cater to Entrepreneurship & Innovation, leadership skills,etc all require huge amount of money to be operationlise

-Foreign tours and foreign industry visits

I think for elite schools,whatever we pay is just a subsidy... MBA schools fill up this money gap by govt grant,alumni donations, and by selling their intellectual property.

just my 2 cents. :)
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Re: Why does the exam cost so much? [#permalink] New post 26 Oct 2010, 07:03
Really? $250 is expensive considering what you will pay for business school, books etc? I'm just tacking it onto the total price so the $250 looks small in comparison. Maybe I won't think so when I'm done and having to pay off the business school loan.
Re: Why does the exam cost so much?   [#permalink] 26 Oct 2010, 07:03
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