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lalliemoon
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18 Dec 2024, 03:35
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Breakdown of the Scenario:
The analysts conclude that profits would decrease if SpeedTech combined the two product lines and sold only the AP at the SP's price. The explanation must account for why selling the more cost-efficient AP at a lower price (SP’s price) would harm profits.
Option Analysis:
Answer: B.
The analysts conclude that profits would decrease if SpeedTech combined the two product lines and sold only the AP at the SP's price. The explanation must account for why selling the more cost-efficient AP at a lower price (SP’s price) would harm profits.
Option Analysis:
- A. Cheaper materials reduce costs, but this does not explain why profits decrease if AP is sold at SP's price.
Irrelevant. - B. AP’s higher perceived value justifies its traditionally higher sale price. Selling AP at SP’s lower price would eliminate this revenue advantage, leading to lower profits.
Relevant. - C. Higher revenue from AP's price compared to SP is consistent with why selling AP at SP's price would decrease profits. However, this focuses on revenue differences without addressing the importance of perceived value.
Less directly relevant than B. - D. Recouping R&D costs explains past financial success, not the projected decrease in profits from combining product lines.
Irrelevant. - E. More frequent updates might increase costs but do not directly explain why combining product lines decreases profits.
Less relevant.
Answer: B.
Bunuel
18 Dec 2024, 03:50
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This is a EXPLAIN question, so let's find the contradiction first.
Two types of processors: AP (costly) and SP. Producing AP is more efficient than producing SP due to advancements in technology and manufacturing processes.
But financial analysts at Speed Tech have determined that the company's profits would decrease if it combined the two product lines, offering its customers only the AP product at the price level of SP.
This question connecting profit with efficient production. Let's look into the choices to explain the gap.
A. The materials used in AP are more readily available and cheaper than those used in SP, which initially reduced manufacturing costs. --- This is not explaining the gap that Financial Analyst mentioned in his hypothesis. INCORRECT.
B. The production method for AP allows for faster output but the sale price for AP has traditionally been set higher due to perceived value. --- AP is traditionally higher is irrelevant. INCORRECT.
C. The revenue generated from the higher-priced AP significantly exceeds the cost savings from its more efficient production compared to SP. --- Just like choice A this is not explaining the gap that Financial Analyst mentioned in his hypothesis. INCORRECT.
D. The research and development costs for developing AP were recouped quickly due to initial high interest when it was first launched. --- recouped initial interest is not addressing the gap. INCORRECT.
E. While AP is more cost-effective to produce, it requires more frequent updates and enhancements than SP. ---- This makes sure that producing AP even though it is efficient, frequent updates may affect the profit. CORRECT
Two types of processors: AP (costly) and SP. Producing AP is more efficient than producing SP due to advancements in technology and manufacturing processes.
But financial analysts at Speed Tech have determined that the company's profits would decrease if it combined the two product lines, offering its customers only the AP product at the price level of SP.
This question connecting profit with efficient production. Let's look into the choices to explain the gap.
A. The materials used in AP are more readily available and cheaper than those used in SP, which initially reduced manufacturing costs. --- This is not explaining the gap that Financial Analyst mentioned in his hypothesis. INCORRECT.
B. The production method for AP allows for faster output but the sale price for AP has traditionally been set higher due to perceived value. --- AP is traditionally higher is irrelevant. INCORRECT.
C. The revenue generated from the higher-priced AP significantly exceeds the cost savings from its more efficient production compared to SP. --- Just like choice A this is not explaining the gap that Financial Analyst mentioned in his hypothesis. INCORRECT.
D. The research and development costs for developing AP were recouped quickly due to initial high interest when it was first launched. --- recouped initial interest is not addressing the gap. INCORRECT.
E. While AP is more cost-effective to produce, it requires more frequent updates and enhancements than SP. ---- This makes sure that producing AP even though it is efficient, frequent updates may affect the profit. CORRECT
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18 Dec 2024, 04:04
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option c is the best answer here's why it is the best answer:
1. It directly addresses the profit issue. Even though Ap is cheaper to produce , it sold at a higher price
2. it explains that the extra revenue from AP's higher price outweights the production cost savings
3. this assumption is necessary to explain why selling only AP at SP's lower price would decrease profits, despite AP's production efficiency
review other options
a) this actually contradicts the scenario. If Ap uses cheaper materials it would further reduce costs, potentially increasing profits when sold at SP's price
b) while this explains why AP is priced higher it dosen't directly address why profit would decrease in the proposed scenario
d) this is irrelevant to the profit calculation past R&D costs don't affect the future profitability in the given scenario
e) this might explain some additional cost for AP but it doesn't directly address the profit decrease in the given scenario
in conclusion option c provides the crucial missing information that explains why selling produced AP at SP's price would result in decreased profit making it the best option
1. It directly addresses the profit issue. Even though Ap is cheaper to produce , it sold at a higher price
2. it explains that the extra revenue from AP's higher price outweights the production cost savings
3. this assumption is necessary to explain why selling only AP at SP's lower price would decrease profits, despite AP's production efficiency
review other options
a) this actually contradicts the scenario. If Ap uses cheaper materials it would further reduce costs, potentially increasing profits when sold at SP's price
b) while this explains why AP is priced higher it dosen't directly address why profit would decrease in the proposed scenario
d) this is irrelevant to the profit calculation past R&D costs don't affect the future profitability in the given scenario
e) this might explain some additional cost for AP but it doesn't directly address the profit decrease in the given scenario
in conclusion option c provides the crucial missing information that explains why selling produced AP at SP's price would result in decreased profit making it the best option
