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Because postage rates are rising, Home Decorator magazine

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Re: Because postage rates are rising, Home Decorator magazine  [#permalink]

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New post 19 May 2018, 01:08
Hi
I chose E . My reasoning was that if the production costs remained the same even with the number of issues reduced then how can the magazine make a profit
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Re: Because postage rates are rising, Home Decorator magazine  [#permalink]

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New post 19 May 2018, 02:12
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Superg8 wrote:
Hi
I chose E . My reasoning was that if the production costs remained the same even with the number of issues reduced then how can the magazine make a profit

We know from the initial statement that the revenue will remain constant. If the production cots remain constant as well we can conclude that the profit will stay the same.
The question asks us to find an answer that shows why profits will decline. Therefore E doesn't give a reason why the profit should decline.

Hope that helps :-)
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Re: Because postage rates are rising, Home Decorator magazine  [#permalink]

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New post 20 May 2018, 16:54
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Masterscorp wrote:
Superg8 wrote:
Hi
I chose E . My reasoning was that if the production costs remained the same even with the number of issues reduced then how can the magazine make a profit

We know from the initial statement that the revenue will remain constant. If the production cots remain constant as well we can conclude that the profit will stay the same.
The question asks us to find an answer that shows why profits will decline. Therefore E doesn't give a reason why the profit should decline.

Hope that helps :-)

Thanks Masterscorp for your explanation! I'll add my two cents...

The main concern here is rising shipping costs (postage rates). All else equal, if shipping costs have increased, then overall profits must have decreased. In other words, if revenues, production costs, and other costs have remained constant but SHIPPING costs have increased, then profits have decreased.

How can we can we decrease our shipping costs? By cutting the number of issues per year in half. That will immediately cut our shipping costs in half, even if, as stated in (E), production costs remain stable. So even if (E) is true, if we cut our shipping costs in half and revenue remains constant, we can boost our profits. Thus, (E) can be eliminated.

(D), on the other hand, tells us that if we cut the number of issues in half, then the our revenue from advertising will also be cut in half. Sure, we don't know what percentage of overall revenue comes from advertising, but this is strong evidence that cutting the number of issues in half will hurt our bottom line. (D) is a better answer.

I hope that helps!
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Re: Because postage rates are rising, Home Decorator magazine  [#permalink]

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New post 25 Jun 2018, 03:12
karen123 wrote:
I also go with D.
The advertising budget of a business is typically a subset of the larger sales budget and, within that, the marketing budget. Advertising is a part of the sales and marketing effort. Money spent on advertising can also be seen as an investment in building up the business.

In order to keep the advertising budget in line with promotional and marketing goals, a business owner should start by answering several important questions:


Haha... Next time success suggestions should be considered while framing questions.
I think you took question very seriously.
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Re: Because postage rates are rising, Home Decorator magazine &nbs [#permalink] 25 Jun 2018, 03:12

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