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An American manufacturer of space heaters reported a 1994 fourth-quart

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An American manufacturer of space heaters reported a 1994 fourth-quart  [#permalink]

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New post 22 Feb 2017, 03:36
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75% (02:03) correct 25% (02:17) wrong based on 164 sessions

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Source: McGraw Hill GMAT

An American manufacturer of space heaters reported a 1994 fourth-quarter net income (total income minus total costs) of $41 million, compared with $28.3 million in the fourth quarter of 1993. This increase was realized despite a drop in U.S. domestic retail sales of space-heating units toward the end of the fourth quarter of 1994 as a result of unusually high temperatures.

Which of the following, if true, would contribute most to an explanation of the increase in the manufacturer’s net income?

A. In the fourth quarter of 1994, the manufacturer paid its assembly-line workers no salaries in November or December because of a two-month-long strike, but the company had a sufficient stock of space-heating units on hand to supply its distributors.
B. In 1993, because of unusually cold weather in the Northeast, the federal government authorized the diversion of emergency funding for purchasing space-heating units to be used in the hardest-hit areas.
C. Foreign manufacturers of space heaters reported improved fourth-quarter sales in the American market compared with their sales in 1993.
D. During the fourth quarter of 1994, the manufacturer announced that it would introduce an extra-high-capacity space heater in the following quarter.
E. In the third quarter of 1994, a leading consumer magazine advocated space heaters as a cost-effective way to heat spaces of less than 100 square feet.

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Re: An American manufacturer of space heaters reported a 1994 fourth-quart  [#permalink]

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New post 22 Feb 2017, 05:21
An American manufacturer of space heaters reported a 1994 fourth-quarter net income (total income minus total costs) of $41 million, compared with $28.3 million in the fourth quarter of 1993. This increase was realized despite a drop in U.S. domestic retail sales of space-heating units toward the end of the fourth quarter of 1994 as a result of unusually high temperatures.

Which of the following, if true, would contribute most to an explanation of the increase in the manufacturer’s net income?

A. Perfect. Massive cost reduction to overcome the drop in sales
B. Not as good as option A
C. Not relevant for the company
D. This announcement does not contribute to this years' sales
E. Nice but not as effective as option one
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An American manufacturer of space heaters reported a 1994 fourth-quart  [#permalink]

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New post 22 Feb 2017, 15:44
An American manufacturer of space heaters reported a 1994 fourth-quarter net income (total income minus total costs) of $41 million, compared with $28.3 million in the fourth quarter of 1993. This increase was realized despite a drop in U.S. domestic retail sales of space-heating units toward the end of the fourth quarter of 1994 as a result of unusually high temperatures.

Which of the following, if true, would contribute most to an explanation of the increase in the manufacturer’s net income?

A. In the fourth quarter of 1994, the manufacturer paid its assembly-line workers no salaries in November or December because of a two-month-long strike, but the company had a sufficient stock of space-heating units on hand to supply its distributors.
B. In 1993, because of unusually cold weather in the Northeast, the federal government authorized the diversion of emergency funding for purchasing space-heating units to be used in the hardest-hit areas.
C. Foreign manufacturers of space heaters reported improved fourth-quarter sales in the American market compared with their sales in 1993.
D. During the fourth quarter of 1994, the manufacturer announced that it would introduce an extra-high-capacity space heater in the following quarter.
E. In the third quarter of 1994, a leading consumer magazine advocated space heaters as a cost-effective way to heat spaces of less than 100 square feet.



Option A correctly explains why ther profits were greater than last year even if the demand was less since the profit =income-cost ther was no cost in the last few months of the year and thats why the profits were higher.,Option B talks about 1993,Option C is focused on foriegn manufacturers which are out of scope.,Option D is not strengthening the argument because anouncing a new product does not directly impact the existing product if it is in different segment but if in same segment then the sales ususally decline no increase,so it does not strenghten the argument.,Option E is giving the expalination of spaces less than 100 sq feet which is not the true reperesntation of the sample set,it requries more information to make concrete sides.
Conclusion option A is correct.
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An American manufacturer of space heaters reported a 1994 fourth-quart  [#permalink]

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New post 03 Mar 2017, 01:13
I think that the most tempting answer after option "A" which is absoultely the best one is option "C", because it attacks the premise that company's volume of sales decreased comparing to 1993 by using analogy approach, however we are not aware of the last year's situation with sales of those companies, probably it was so small that there was no way but to slightly increase in 1994.
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An American manufacturer of space heaters reported a 1994 fourth-quart  [#permalink]

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New post 20 Mar 2017, 11:34
SajjadAhmad wrote:
Source: McGraw Hill GMAT

An American manufacturer of space heaters reported a 1994 fourth-quarter net income (total income minus total costs) of $41 million, compared with $28.3 million in the fourth quarter of 1993. This increase was realized despite a drop in U.S. domestic retail sales of space-heating units toward the end of the fourth quarter of 1994 as a result of unusually high temperatures.

Which of the following, if true, would contribute most to an explanation of the increase in the manufacturer’s net income?

A. In the fourth quarter of 1994, the manufacturer paid its assembly-line workers no salaries in November or December because of a two-month-long strike, but the company had a sufficient stock of space-heating units on hand to supply its distributors.
B. In 1993, because of unusually cold weather in the Northeast, the federal government authorized the diversion of emergency funding for purchasing space-heating units to be used in the hardest-hit areas.
C. Foreign manufacturers of space heaters reported improved fourth-quarter sales in the American market compared with their sales in 1993.
D. During the fourth quarter of 1994, the manufacturer announced that it would introduce an extra-high-capacity space heater in the following quarter.
E. In the third quarter of 1994, a leading consumer magazine advocated space heaters as a cost-effective way to heat spaces of less than 100 square feet.


Option A clearly explains why the manufacturer's net income increses
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An American manufacturer of space heaters reported a 1994 fourth-quart &nbs [#permalink] 20 Mar 2017, 11:34
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