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# Because of the rising costs of gasoline, a small bus company has decid

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Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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05 Mar 2016, 19:00
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75% (hard)

Question Stats:

59% (02:23) correct 41% (02:36) wrong based on 296 sessions

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Because of the rising costs of gasoline, a small bus company has decided to decrease the number of weekend trips it runs to a nearby metropolitan area by one third. It will not lose any riders, because the decreased number of trips is adequate for the existing number of weekend riders. The company will save substantially on fuel costs and will have one fewer driver working on weekends. Moreover, the bus company will continue to raise revenue through print advertising inside the bus and on the bus ’ s exterior.

Which of the following if true, provides the strongest evidence that the bus company ’ s profits are likely to decrease if the company implements the plan?

a) Many of the weekend riders would continue riding the bus even if the fare was increased.
b)Most of the advertisers will continue to spend the same amount on advertising per mile and the displaced weekend driver will not earn more by switching to a weekday route at the company.
c) The displaced weekend driver will earn the same salary driving on weekdays and the advertisers will increase their advertising on the weekend.
d) Maintenance costs per bus will remain constant.
e) The increased cost of fuel increases the operating costs of one round trip by twenty per cent.
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Re: Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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05 Mar 2016, 19:34

Assume that advertisers are spending X dollars/mile. However, the company is reducing total number of miles by reducing the frequency of buses; and hence, earnings through advertising will decrease. This creates a doubt whether company will keep increasing the revenue.

Hope I chose the right answer.
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Re: Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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05 Mar 2016, 20:10
a) Many of the weekend riders would continue riding the bus even if the fare was increased ------- No of riders will remain the same--- Revenue from them will remain the same ----- No effect on Profit. NO EFFECT
b)Most of the advertisers will continue to spend the same amount on advertising per mile and the displaced weekend driver will not earn more by switching to a weekday route at the company ----- Less no of trips----less no of miles---- Given same advertising per mile implies the advertising revenue/profit has decreased. STRENGTHEN
c) The displaced weekend driver will earn the same salary driving on weekdays and the advertisers will increase their advertising on the weekend. ---- Advertisers will increase the advertising ---- Increase in Revenue/Profit and No effect because of driver salary component. WEAKEN
d) Maintenance costs per bus will remain constant. ----- No of bus are not reducing so it doesnt matter --- No effect on revenue beacause of this. NO EFFECT
e) The increased cost of fuel increases the operating costs of one round trip by twenty per cent ---- It is already taken care of by the steps proposed by the company. UNCERTAIN

B it is
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Re: Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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06 Mar 2016, 00:42
Its C for me.

The company's plan was to reduce cost and save more.

But this won't happen if the driver is paid the same irrespective of his no. of working days and that there will be loss of revenue from advertising as it was going to increase in weekend.

Thus,the plan will result in loss and would weaken the argument.
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Re: Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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06 Mar 2016, 01:17
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ynk wrote:
Its C for me.

The company's plan was to reduce cost and save more.

But this won't happen if the driver is paid the same irrespective of his no. of working days and that there will be loss of revenue from advertising as it was going to increase in weekend.

Thus,the plan will result in loss and would weaken the argument.

Hi,
C should not be the answer for following reasons..

the company will lose/earn on following three counts--
a) displaced weekend drivers
b) fuel

B tells us--
a) the displaced driver will shift to weekdays and will earn more than what he was earning on weekends-- so loss to company in view of extra payment
b) fuel is ofcourse saved
c) advertising is dependent on PER MILE, so since buses have been lessened, the mileage will go down and subsequently revenue will go down..

So, a and c are resulting in LESSER revenues and thus weakens the argument

C tells us--
a) the displaced driver will earn the same on week days, so there is no loss in term sof extra payment..
b) fuel is ofcourse saved

So, no losses in revenue and thus does not weaken the argument

ans should be B

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Re: Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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06 Mar 2016, 10:05
Oh! What the question, it was.

I was lost for more than 4.30 min and had no clue. and then I re-read the argument three times at a stretch.

The thing clicked here was when i saw the number of miles that weekend bus ran is reduced. and then i found that amount of advertising per mile remained same.

let's assume that initially bus drove for 500 miles and amount of adv. income per mile is 100 INR.

so, total income = 50000 INR

Now, number of miles got reduced.

let's take it as 200 miles.

so, income out of it = 20000 INR

hence, it's income gets reduced and so, the profit is.

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Re: Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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02 Apr 2016, 18:50
chetan2u wrote:
ynk wrote:
Its C for me.

The company's plan was to reduce cost and save more.

But this won't happen if the driver is paid the same irrespective of his no. of working days and that there will be loss of revenue from advertising as it was going to increase in weekend.

Thus,the plan will result in loss and would weaken the argument.

Hi,
C should not be the answer for following reasons..

the company will lose/earn on following three counts--
a) displaced weekend drivers
b) fuel

B tells us--
a) the displaced driver will shift to weekdays and will earn more than what he was earning on weekends-- so loss to company in view of extra payment
b) fuel is ofcourse saved
c) advertising is dependent on PER MILE, so since buses have been lessened, the mileage will go down and subsequently revenue will go down..

So, a and c are resulting in LESSER revenues and thus weakens the argument

C tells us--
a) the displaced driver will earn the same on week days, so there is no loss in term sof extra payment..
b) fuel is ofcourse saved

So, no losses in revenue and thus does not weaken the argument

ans should be B

I got to B as well only because it says ads/mile.
you though mention that the driver will earn more if he is switched to weekdays schedule. but B says that driver will not earn more. as a matter of fact, the info about the driver is neutral. the company will neither lose nor win if it switches the driver to weekdays schedule, but it will lose \$ because advertisers will pay less.
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Re: Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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12 Aug 2017, 07:26
Really what a question! I did not get it right but after spending some time, here is my analysis:

Option B is the correct answer.

Why is Option A wrong?
Although the riders may continue to ride with an increased fare, the increase in cost here may be compensated with the decrease in cost due to decrease in number of trips. Overall net increase/decrease could be 0.

Why is Option B correct?
From B we know that the advertising cost per mile remains constant. From the premise we know that the number of trips have been reduced. This means the advertising for those trips is a cost to the company. In addition, the weekend driver also cannot earn more on a weekday (no way to show that there could be a profit).

Why is Option C incorrect?
Advertising is increasing on weekends. This could mean that the loss in reducing number of trips can be accomodated here. In this case no decrease overall (but per question we are seeking an option that shows a decrease).

Why is Option D incorrect?
This should be easy to eliminate. Maintenance cost then for 30 bus trips, say, was 1000rs. Now for 20 bus trips also is 1000rs. Does not give any evidence to show there is a decrease in the profits.

Why is Option E incorrect?
This is what tempted me. Although the cost has increased by 20%, it could be possible that the fuel cost that was saved by reducing number of trips can be compensated with the increase in the cost here.

Tricky question! Another way to go to B is by thoroughly evaluating each answer choice, eliminating them and reaching towards B.
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Re: Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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28 Sep 2017, 09:53
I am not able to comprehend how this part of the sentence strengthen the claim.

the displaced weekend driver will not earn more by switching to a weekday route at the company.
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Re: Because of the rising costs of gasoline, a small bus company has decid  [#permalink]

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06 Aug 2019, 07:55
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Re: Because of the rising costs of gasoline, a small bus company has decid   [#permalink] 06 Aug 2019, 07:55