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A car wash service has decided to discontinue its repeat customer

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A car wash service has decided to discontinue its repeat customer [#permalink]

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A car wash service has decided to discontinue its repeat customer coupons wherein customers who purchase 5 car washes get a 6th car wash for free. This is a smart move for the car wash service, because it must pay its workers for every car washed. Because the coupons forced the car wash service to give away numerous free car washes, the repeat customer coupons caused the company’s profits to decline.

Which of the following is a reason the argument is most vulnerable to criticism?

(A) The argument ignores the fact that another customer coupon initiative could take the place of this one.

(B) The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs.

(C) The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program.

(D) The author fails to consider the fact that the car wash service may be exaggerating the number of free car washes it was forced to give out.

(E) The argument overlooks potential rewards from the customer coupons initiative while focusing only on its costs.

Originally posted by nitin6305 on 09 Aug 2013, 13:46.
Last edited by hazelnut on 01 Apr 2018, 07:22, edited 3 times in total.
Renamed the topic, added OA.
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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Can someone please help me with eliminating option C. Aren't we talking about profits here?
Conclusion says that move is smart because it will avoid profit declines.
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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nitin6305 wrote:
Can someone please help me with eliminating option C. Aren't we talking about profits here?
Conclusion says that move is smart because it will avoid profit declines.


Hi nitin

I'm quite confused. You posted OA is C, but you ask everybody to give you reasons to eliminate C. :?: So, what is the OA actually?

I did pick B and I'm not convinced by C (if C is the OA). The stimulus say "the company must pay its workers for every car washed". It means the company pays its employees for every car they wash. ==> the fewer cars the employees wash, the less salaries they receive. Labor cost is operating cost. (I'm 100% sure because I'm an accountant.) ==> by removing the coupons program, the company can adjust its operating costs.
==> The operating costs of the car wash service CAN BE ADJUSTED by removing the coupon program. Hence, C is not a flaw of reasoning.

Please confirm nitin6305.

Thanks.
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 09 Aug 2013, 20:44
Heres my take I feel the author assumes that since you are incurring a cost per car wash giving a coupon implies lost revenue. He feels that customers will continue to come even if the coupons were discontinued and hence the costs for that 6th car wash will be recovered but that may not be the case as people may reduce the number of car washes owing to that discontinuation of the coupon
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 09 Aug 2013, 21:50
I agree with above explanation by pghai for option B)...but I somehow feel that option B has not been worded correctly.

It mentions that author ignores to compare the profit during coupon intiative with its operating cost when it should have been whether delta revenue during and before coupon intiative outweighs the coupon operating cost !
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 09 Aug 2013, 21:53
pqhai wrote:
nitin6305 wrote:
Can someone please help me with eliminating option C. Aren't we talking about profits here?
Conclusion says that move is smart because it will avoid profit declines.


Hi nitin

I'm quite confused. You posted OA is C, but you ask everybody to give you reasons to eliminate C. :?: So, what is the OA actually?

I did pick B and I'm not convinced by C (if C is the OA). The stimulus say "the company must pay its workers for every car washed". It means the company pays its employees for every car they wash. ==> the fewer cars the employees wash, the less salaries they receive. Labor cost is operating cost. (I'm 100% sure because I'm an accountant.) ==> by removing the coupons program, the company can adjust its operating costs.
==> The operating costs of the car wash service CAN BE ADJUSTED by removing the coupon program. Hence, C is not a flaw of reasoning.

Please confirm nitin6305.

Thanks.



Hello pqhai,

Kindly provide a detailed explanation for choosing B. I initially chose C but your explanation has set me thinking.
Thanks
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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Hi,

I presume the reasoning for B will be as follows:

The company ignored profits earned during the initiative and considered only costs. Hence, the company should re look at the argument as profits might be more than the costs thereby falsifying the argument presented.

However, I think even this is not correct.

The company in its argument is talking not whether it earned actual profits or not. It is rather saying that its profits declined due to increased labor cost arising out of the 6th free cost. Thus the argument is only and only on the cost incurred on the 6th free wash and how that contributes to the profit decline.

Hence, option C, which talks of attending to the cost of the 6th free wash by removing it takes the cake.



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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 10 Aug 2013, 00:04
I don't think C is the best because it doesn't give any reasons and simply states that the argument made a mistake.
IMO, B should be the good answer.
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 10 Aug 2013, 01:58
I choose B and then analyze both B and C. I think that C is the right answer because of following reasoning:-

Choice B states : "The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs". This choice talks about the coupons initiative. The word initiative changes the meaning. In the argument no where it has been written that after initiating the "repeat customer coupon" the company realizes that they are making loss on the 6th car service. It can well be assumed that "repeat customer coupon" program is there for many years and now the company is making loss.

Choice C states "The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program" and is correct because it identifies a reason the argument is most vulnerable to criticism. The argument implies that the company making if any total profit in 5 nos. of car washes is less than the 6th car wash, which is free and thereby causing company profits to decline is most vulnerable and that too from the point of view of only labour cost. Hence Choice C is the correct answer.
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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Answer is E. For issuing a coupon, a customer has to visit 5 times. No coupon and a customer might not visit for any wash.

Below is OE.

The correct answer is (E).

The conclusion here is that getting rid of the customer coupons is a “smart move.” Why? Because the company had to “give away numerous free car washes,” and thus the profits declined. The author fails to take into account any benefits the initiative may have had on business. For example, patrons may have returned for their 2nd, 3rd, 4th, and 5th car washes solely based on the initiative. It may be that without the initiative, the car wash service’s profits would have been much less than with the initiative.
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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nitin6305 wrote:
A car wash service has decided to discontinue its repeat customer coupons wherein customers who purchase 5 car washes get a 6th car wash for free. This is a smart move for the car wash service, because it must pay its workers for every car washed. Because the coupons forced the car wash service to give away numerous free car washes, the repeat customer coupons caused the company’s profits to decline.

Which of the following is a reason the argument is most vulnerable to criticism?

-The argument ignores the fact that another customer coupon initiative could take the place of this one.
-The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs.
-The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program.
-The author fails to consider the fact that the car wash service may be exaggerating the number of free car washes it was forced to give out.
-The argument overlooks potential rewards from the customer coupons initiative while focusing only on its costs.


This question is a bit challenging because it's difficult to identify the type of question. Looking at the question itself - "Which of the following is a reason the argument is most vulnerable to criticism" - we can see that the question is dealing in some way with weakening the argument. It's basically asking, "why would you be able to weaken this argument?". In order to weaken the argument, you need to identify an assumption (the unstated portions of the argument that must be true in order for the conclusion to be valid) and then attack the assumption. So, the key to this question is really to identify the assumption.

The assumptions will sit between the conclusion and the premises. Here the conclusion is that the car wash company made a good move by removing is couponing program. The premises are 1) the workers are paid by the car so that 5th car wash includes costs but no revenues and 2) the success of the program required many of the 6th, "cost-only" car washes, which would cause the overall company's profits to decline.

What would we have to assume in order for the conclusion (it's a good move to stop the coupon program) to remain valid? Since the argument is solely focused on expenses here and profits are revenue minus expenses we should be thinking about assumptions that are related to revenues.

A) Remember that assumptions sit in the space between conclusion and premise. Adding a different program may be a good move for the company, but it has no connection to the removal of the current couponing program.
B) This one is a bit tricky. Here the answer is shifting meaning on us. The premise refers to the declining profits but this answer choice is referring to the overall profits of the company. The GMAT likes to play these little meaning shift games on incorrect answers - be careful.
C) This is not an accurate statement. Since labor costs are variable (each wash costs money), the operating costs would be impacted by removing the program.
D) This one tries to make you think that if the problem were smaller we could change our mind about the effectiveness of the program. However, the argument is based on the variable costs of each wash, so whether we have a huge number of washes or a small number of washes, we would have declining profits either way.
E) Finally something strong about revenues. Here we have a necessary assumption that is placed in a weakening statement. In order to believe the conclusion that removing the coupons is a good move, we first have to believe that there were no benefits (particularly related to revenues) achieved from the program between the 1st and 5th washes. As the OA states, the program may have induced many customers to purchase additional car washes in order to hit the 6th wash. So, even though that 6th wash causes a reduction in company, the profits would have been greatly increased by the those additional purchases. This statement makes the argument vulnerable to criticism.

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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 10 Aug 2013, 12:36
Can anyone explain the difference between B and E ... isn't profits and potential rewards the same thing?
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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First of all, answer choice E is implying revenues when in talks about rewards. The GMAT will assume that you have a working knowledge of revenue - cost = profits. So revenues in E are not the same as profits in B.

Let me talk about B for a second. It really makes no sense from a business standpoint. The fundamental business question is whether revenues are greater than costs. If so, you have profit and life is good. If not, you don't have a profit and you go out of business. Comparing the level of profit for the company (total revenues less total costs) against the costs of the initiative really makes no sense and certainly won't tell us if stopping the coupon program is a good idea.

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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 01 May 2015, 06:03
nitin6305 wrote:
A car wash service has decided to discontinue its repeat customer coupons wherein customers who purchase 5 car washes get a 6th car wash for free. This is a smart move for the car wash service, because it must pay its workers for every car washed. Because the coupons forced the car wash service to give away numerous free car washes, the repeat customer coupons caused the company’s profits to decline.

Which of the following is a reason the argument is most vulnerable to criticism?

-The argument ignores the fact that another customer coupon initiative could take the place of this one.
-The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs.
-The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program.
-The author fails to consider the fact that the car wash service may be exaggerating the number of free car washes it was forced to give out.
-The argument overlooks potential rewards from the customer coupons initiative while focusing only on its costs.



Completely missed the word 'initiative' and chosen C
:oops:
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 02 May 2015, 13:22
on a second note, I think there should be 'NOT' in the quesiton stem.

This is smart move for the car wash service....... (there should be a NOT)

does anything the same.


nitin6305 wrote:
A car wash service has decided to discontinue its repeat customer coupons wherein customers who purchase 5 car washes get a 6th car wash for free. This is a smart move for the car wash service, because it must pay its workers for every car washed. Because the coupons forced the car wash service to give away numerous free car washes, the repeat customer coupons caused the company’s profits to decline.

Which of the following is a reason the argument is most vulnerable to criticism?

-The argument ignores the fact that another customer coupon initiative could take the place of this one.
-The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs.
-The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program.
-The author fails to consider the fact that the car wash service may be exaggerating the number of free car washes it was forced to give out.
-The argument overlooks potential rewards from the customer coupons initiative while focusing only on its costs.

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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 09 Nov 2015, 09:44
shriramvelamuri wrote:
on a second note, I think there should be 'NOT' in the quesiton stem.

This is smart move for the car wash service....... (there should be a NOT)

does anything the same.



Be careful with the logic string here. The question is asking why the argument as presented is vulnerable to criticism. The argument states that removing the coupons is a smart move and our job is to find the answer choice that tells us why that isn't a smart move.

KW
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Re: A car wash service has decided to discontinue its repeat customer [#permalink]

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New post 27 Jan 2018, 22:53
KyleWiddison wrote:
nitin6305 wrote:
A car wash service has decided to discontinue its repeat customer coupons wherein customers who purchase 5 car washes get a 6th car wash for free. This is a smart move for the car wash service, because it must pay its workers for every car washed. Because the coupons forced the car wash service to give away numerous free car washes, the repeat customer coupons caused the company’s profits to decline.

Which of the following is a reason the argument is most vulnerable to criticism?

-The argument ignores the fact that another customer coupon initiative could take the place of this one.
-The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs.
-The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program.
-The author fails to consider the fact that the car wash service may be exaggerating the number of free car washes it was forced to give out.
-The argument overlooks potential rewards from the customer coupons initiative while focusing only on its costs.


This question is a bit challenging because it's difficult to identify the type of question. Looking at the question itself - "Which of the following is a reason the argument is most vulnerable to criticism" - we can see that the question is dealing in some way with weakening the argument. It's basically asking, "why would you be able to weaken this argument?". In order to weaken the argument, you need to identify an assumption (the unstated portions of the argument that must be true in order for the conclusion to be valid) and then attack the assumption. So, the key to this question is really to identify the assumption.

The assumptions will sit between the conclusion and the premises. Here the conclusion is that the car wash company made a good move by removing is couponing program. The premises are 1) the workers are paid by the car so that 5th car wash includes costs but no revenues and 2) the success of the program required many of the 6th, "cost-only" car washes, which would cause the overall company's profits to decline.

What would we have to assume in order for the conclusion (it's a good move to stop the coupon program) to remain valid? Since the argument is solely focused on expenses here and profits are revenue minus expenses we should be thinking about assumptions that are related to revenues.

A) Remember that assumptions sit in the space between conclusion and premise. Adding a different program may be a good move for the company, but it has no connection to the removal of the current couponing program.
B) This one is a bit tricky. Here the answer is shifting meaning on us. The premise refers to the declining profits but this answer choice is referring to the overall profits of the company. The GMAT likes to play these little meaning shift games on incorrect answers - be careful.
C) This is not an accurate statement. Since labor costs are variable (each wash costs money), the operating costs would be impacted by removing the program.
D) This one tries to make you think that if the problem were smaller we could change our mind about the effectiveness of the program. However, the argument is based on the variable costs of each wash, so whether we have a huge number of washes or a small number of washes, we would have declining profits either way.
E) Finally something strong about revenues. Here we have a necessary assumption that is placed in a weakening statement. In order to believe the conclusion that removing the coupons is a good move, we first have to believe that there were no benefits (particularly related to revenues) achieved from the program between the 1st and 5th washes. As the OA states, the program may have induced many customers to purchase additional car washes in order to hit the 6th wash. So, even though that 6th wash causes a reduction in company, the profits would have been greatly increased by the those additional purchases. This statement makes the argument vulnerable to criticism.

KW


Hi, Dont you think that the word potential look susceptible to weaken the argument. We dont know for sure that the coupon system actually benefited the company. All I am saying is that I feel option E is not well-worded.
Re: A car wash service has decided to discontinue its repeat customer   [#permalink] 27 Jan 2018, 22:53
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