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A company that manufactures heavy industrial equipment

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Manager
Joined: 10 Jan 2006
Posts: 114

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A company that manufactures heavy industrial equipment [#permalink]

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06 Apr 2006, 20:18
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A company that manufactures heavy industrial equipment employs dozens of people in jobs that are considered quite hazardous. The company obeys federal regulations governing workplace safety, and, to comply with new regulations instituted to avoid recently discovered risks from airborne particulate matter, company engineers were required to install extremely expensive air filtering equipment. However, despite the expense of the air filtering equipment, the company's operating costs for the quarter were considerably lower than normal.

Which of the following, if true, most helps to resolve the apparent paradox?

Over half the company's expenditures to maintain worker safety go to pay for protective garments; yet only a small percentage of such expenditures go to pay for nose and mouth filters.

Prior to the installation of the air filtering equipment, the company had had to prevent damage due to particulate contamination of manufacturing equipment.

The company's costs of labor, which make up a large fraction of operating costs, increased during the same period.

When the air filtering equipment was installed in the manufacturing facility, the company took the opportunity to upgrade the temperature control equipment.

The majority of the company's employees work in the areas of the plant in which the air filtering equipment was installed.

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VP
Joined: 21 Mar 2006
Posts: 1124

Kudos [?]: 49 [0], given: 0

Location: Bangalore

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07 Apr 2006, 01:40
Riuscita wrote:
A company that manufactures heavy industrial equipment employs dozens of people in jobs that are considered quite hazardous. The company obeys federal regulations governing workplace safety, and, to comply with new regulations instituted to avoid recently discovered risks from airborne particulate matter, company engineers were required to install extremely expensive air filtering equipment. However, despite the expense of the air filtering equipment, the company's operating costs for the quarter were considerably lower than normal.

Which of the following, if true, most helps to resolve the apparent paradox?

Over half the company's expenditures to maintain worker safety go to pay for protective garments; yet only a small percentage of such expenditures go to pay for nose and mouth filters.

Prior to the installation of the air filtering equipment, the company had had to prevent damage due to particulate contamination of manufacturing equipment.

The company's costs of labor, which make up a large fraction of operating costs, increased during the same period.

When the air filtering equipment was installed in the manufacturing facility, the company took the opportunity to upgrade the temperature control equipment.

The majority of the company's employees work in the areas of the plant in which the air filtering equipment was installed.

Going with E. A, B and D are out of scope. C adds to the paradox - If labour costs went up, the operating costs should have risen even more.

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Manager
Joined: 09 Feb 2006
Posts: 129

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Location: New York, NY

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07 Apr 2006, 09:43
Not listed here, but wouldn't part of the "technical" answer be that the air filtering system, although expensive, has nothing to operating costs? it's a capital improvement expenditure.

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Manager
Joined: 10 Jan 2006
Posts: 114

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07 Apr 2006, 12:58
OA is B

Wow ... I was really really sleepy ..... to post a CR with a SC heading

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07 Apr 2006, 12:58
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