Gegeyan wrote:
AdityaHongunti wrote:
A United States manufacturer of farm equipment reported a 1988 third-quarter net income of $32 million, compared with $25.5 million in the third quarter of 1987. This increase was realized despite a drop in United States retail sales of farm equipment toward the end of the third quarter of 1988 as a result of a drought.
(B) In the third quarter of 1988, the manufacturer paid no wages during a six-week strike, but stocks on hand were adequate to supply dealers.
GMATNinja
b]mikemcgarry[/b]
chetan2u
sayantanc2k
the difference between 2 incomes is around 6 million . which is a HUGE amount.
and ption B says wages werent paid for 6 weeks . SO are we supposed to say that the wages which werent paid for 6 weeks made up for 6 million? i mean are we supposed to accept such huge leaps?? 6 weeks of wages make up for 6 million???? though i understand that other profits may also be there. But shoudl we be satisfied with just one source of profit?
That's the exactly what I thought, so I ruled out B.
Help, please?
Be careful here. Where in the passage does it say that we should consider a difference of 6 million to be a HUGE amount? Where in the passage are we told the % of total expenses that labor makes up for this particular company? What do these quantitative measurements have to do with the paradox that we're trying to resolve?
Let's stay focused on (1) understanding the logic of this paradox, (2) eliminating the choices that definitely don't resolve that paradox and (3) picking the remaining choice that contributes most to explaining that paradox.
Skywalker18 and
kyatin did a nice job nailing down the paradox:
Skywalker18 wrote:
Income = Revenue - Expenses
The sales decreased towards the end of the third quarter, but income increased
At the end of the day we're trying to explain why a single manufacturer's income increased during a specific time period, despite a general decline in retail sales during that same period. We're never told how big that general decline was. As
pkshankar mentioned, we're never told how the manufacturer's sales matched up to the general trend. We're also never told anything about the manufacturer's expenses during this time.
A few folks have pointed out why A, C, D, and E can be eliminated. So to focus on your doubt, let's take one more look at (B):
Quote:
In the third quarter of 1988, the manufacturer paid no wages during a six-week strike, but stocks on hand were adequate to supply dealers.
- Income = Revenue - Expenses. We're trying to explain how income could go up.
- Revenue for this company presumably went down by some amount, but we don't know by how much.
- Expenses definitely went down because the company paid no wages for six weeks. We don't know how big the savings were, but knowing that absolutely $0 were paid out to workers for half of the quarter is not trivial. And even if we don't have a specific figure here, knowing that a core expense of manufacturing disappeared for half the quarter goes a long way towards explaining the logical paradox. Bottom line: A key expense went down.
- Because stocks on on hand during the strike were adequate to supply dealers, we also know that the company did not incur additional expenses specifically to make up for the lack of labor during this time.
This is enough for us to keep (B) around! It's more compelling than any other answer choices, and that is enough to satisfy what the question is asking.
I hope this helps!