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Corporate Officer: Last year was an unusually poor one for our chemica

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sudhirmadaan

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mikemcgarry

sudhirmadaan

Hi Mike , thanks for responding back. Actually my concern was with C and E, but reading again and again your explanation above made things clearer. E is actually out of scope, because we need to provide critic to evidence and evidence is about chemical only. But i did not understand your point in
if the pharmaceutical division, which previously constituted 70% of the profits, had a sour year, profits for the whole company would be down,(understood) and all the smaller divisions would occupy a much larger percentage of that much smaller pie. This goes to the core of the problem(not clear how does this relate to main point of the passage)

Dear sudhirmadaan,
Excellent question, my friend. :-)

I will try to explain.

Let's think about real numbers. Suppose, in previous years, the profits were $10 million. The pharmaceutical division produced 70% of those, or $7 million dollars. Let's assume that was true last year. Last year, the chemical division contributed 10%, or $1 million in profits. Let's say a third fictional Division X accounted for the other $2 million in profits, or 20%.

Now, this year, the pharmaceutical division had an off year. Let's make this extreme, with $7 million going down to $1 million. Assume that the other two divisions remained unchanged: the chemical division still contributed $1 million, and Division X producing $2 million. Now, the total profits is only $4 million. The chemical division accounts for 25% of this, and Division X accounts for 50%.

OK, with all this in mind, what I was saying was that when the pharmaceutical division decreases, it decreases the size of the whole pie, because it was a very big piece of that pie. This means that the same cash value contribution from the smaller divisions (e.g. chemical and Division X) will account for higher percentages because the total has gotten smaller. In the scenario I proposed, chemical went from 10% to 25%, and Division X went from 20% to 50%, even though they contributed the exact same dollar amount in both years. Those same dollar amounts represent higher percentages, only because the total has gone down.

This is the core of the fallacy of the argument. The Corporate Officer suggest that the company is in good shape, because the chemical division went from 10% to 25%, as if that represents growth, but as my numerical scenario demonstrates, that percentage increase might represent not a single dime of increase in profits, but just the fact that the total profits decreased.

In this numerical scenario, the total profits went from $10M to $4M. There's absolutely nothing positive about that. The fact that the $1M from the chemical division used to be only 10% of $10M and now is 25% of $4M is irrelevant: it does not mean that any more profits are arising, or any other increase will offset the losses in the pharmaceutical division. It's a completely fallacious suggestion, and choice (C) goes to the core of this fallacy.

Does all this make sense?
Mike :-)

Thanks a tonn. Moment i read this question, overall profits are down is popping in my mind m but did not relate that, but your explanation did . thanks a lot.

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feruz77

Corporate Officer: Last year was an unusually poor one for our pharmaceutical division, which has traditionally contributed about 70 percent of the corporation’s profits. It is therefore encouraging that there is the following evidence that the chemical division is growing stronger: it contributed 25 percent of the corporation’s profit up from 10 percent the previous year.

On the basis of the facts stated which of the following is the best critique of the evidence presented above?

(A) The increase in the chemical division’s contribution to corporation profits could have resulted largely from the introduction of a single, important new product.
(B) In multi-divisional corporations that have chemical divisions, over half of the corporation’s profits usually come from chemicals
(C) The percentage of the corporation’s profits attributable to the chemical division could have increased even if that division’s performance had not improved.
(D) The information cited does not make it possible to determine whether the 25 percent share of profits cited was itself an improvement over the year before.
(E) The information cited does not make it possible to compare the performance of the chemical and pharmaceutical divisions in terms of the percent of total profits attributed to each.

holidevil

I agree with your reasoning. I have doubt for B. You say that it is irrelevant. Consider this: Normally the share of chemical divisions in the profits of the org. is more than half. Here, the share has reached only quarter stage. It tells that the chemical division is not performing well. A contender choice. How can it be irrelevant at all?

Dear holidevil
Let's say (B) is true ---- does this mean that, in companies that have chemical divisions, the other divisions (such as pharmaceutical) are anemic? By contrast, the company in this question, in addition to having a chemical division as robust as any out there, also has other divisions that are even stronger, unlike the other chemical companies? In other words, this fact may imply that this company's chemical division is weak, or it may not. We simply don't have enough facts to decide. Remember, all we are comparing are percents. It's quite possible that 15% of one company is considerably more than 60% of another company. In CR terms, all this makes (B) irrelevant --- any fact which could be a strengthener or could be a weaker, pending more as yet unknown facts, is irrelevant. Does this make sense?

fameatop

Hi Mike,
I am not able to understand how come option C is correct & D is incorrect. Can you kindly throw some light on the same.
Regards, Fame

Dear Fame
This is a great CR question, and I think the real sticking point is between (C) & (D). It comes down to exact wording. Let's look at the exact wording.
(C) The percentage of the corporation’s profits attributable to the chemical division could have increased even if that division’s performance had not improved.
(C) draws the crucial distinction between percentage of profits and actual performance, actual numerical profits. That's the ambiguity at stake in this question. Just because percent goes up does NOT mean that overall profits went up. In particular, if the pharmaceutical division, which previously constituted 70% of the profits, had a sour year, profits for the whole company would be down, and all the smaller divisions would occupy a much larger percentage of that much smaller pie. This goes to the core of the problem.
(D) The information cited does not make it possible to determine whether the 25 percent share of profits cited was itself an improvement over the year before.
This answer choice is about "percent share of the profits" --- this year was 25%, and was this an improvement over last year's percent share in the profits? Well, in fact, the prompt explicitly tells us --- the previous year's share of the profits for the chemical division was 10%, so in terms of percent share in the profits, the 25% is a clear improvement. This answer choice says zilch about the important distinction between percent of profits and actual numerical profits.
Does all this make sense?
Mike :-)

Hi Mike

I still doubt the explanation and the OA given here. In your explanation of C you have mentioned that "Just because percent goes up does NOT mean that overall profits went up". Does this not totally fit into option D as well. According to you for D previous share was 10% and this years share is 25% which is an improvement. Here also just because %age went up does not mean that profits also went up. Last year the profit could be 1000 Dollars and chem div share could be 100 dollars, whereas if this year it is 100 dollars,even with 25% the profits could still be lower. IMO C does not still really fit into the solution.
Please correct me if I am wrong.

Thanks

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17 Sep 2015, 12:06

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shivamchugh89

Dear shivamchugh89,
I'm happy to respond. :-)

Remember that this is an official question, from GMAT Prep. It's the nature of official GMAT CR questions that, while only one answer choice is definitively correct, the other four are tempting and, from a certain perspective, might seem correct. Our job on the GMAT CR is NOT to try to find the special perspective that will make a tempting wrong answer appear correct. Our job is to discern which is the best answer. This can be very tricky.

Here's the prompt again.
Corporate Officer: Last year was an unusually poor one for our pharmaceutical division, which has traditionally contributed about 70 percent of the corporation’s profits. It is therefore encouraging that there is the following evidence that the chemical division is growing stronger: it contributed 25 percent of the corporation’s profit up from 10 percent the previous year.
As well have discussed on this thread, and as you seem to understand, the screaming fallacy in what the Corporate Officer says is the conflation of percentage increase with dollar amount increase. He equates those two, and they may not be equivalent. As I demonstrated with the numerical examples above, percents of certain departments could go up, even if dollar amount went down.

Now, the specific question:
On the basis of the facts stated which of the following is the best critique of the evidence presented above?
Some of the incorrect answers might be indirect critiques, or might be ambiguous. The best will be the answer that zeros in on the screaming fallacy in the prompt.

I'll just analyze the two choices you cited:
(C) The percentage of the corporation’s profits attributable to the chemical division could have increased even if that division’s performance had not improved.
AHA! The difference of a percent increase vs. a dollar increase! This answer says: a percent increase may not equal a dollar increase, and that is precisely the oversight of the Corporate Officer. This answer choice makes a direct bull's eye hit on the major fallacy of the prompt.

(D) The information cited does not make it possible to determine whether the 25 percent share of profits cited was itself an improvement over the year before.
What does the author mean by "improvement"? Does he mean a percentage increase or a dollar increase? If the person saying this is of the same mindset as the Corporate Officer, then they both will agree that 25% is an improvement over 10%. If the person saying this has the same understanding as the speaker of (C), then this would be an equivalent objection. The trouble is: there's ambiguity. It could be another valid devastating objection, as (C) is, but it depends on the reading we give to the word "improvement" --- we don't know how the speaker intended that word. This choice leaves us with questions.

A maybe, possible objection is not as good as a solid, unambiguous objection. That's why (C) is a better answer than (D), and the best answer overall.

Does all this make sense?
Mike :-)

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the question looks bazaar indeed, but it turns out that the right answer is all about that the argument fails to show the causal relation for the chemical division.
The pharmaceutical division is just unrelated fact.

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Corporate Officer: Last year was an unusually poor one for our chemical division, which has traditionally contributed about 60 percent of the corporation's profits. It is therefore encouraging that there is the following evidence that the pharmaceutical division is growing stronger: it contributed 45 percent of the corporation's profits, up from 20 percent the previous year.

On the basis of the facts stated, which of the following is the best critique of the evidence presented above?

Boil it down - The pharmaceutical division is growing stronger since its % share of corporation's profits has increased from 20 to 45 %.
- It experienced ABSOLUTE growth ?
What if - the total profits of the entire corporation are down. The entire pie might be smaller and therefore the Pharma profits might stay the same and yet be a larger percentage of a smaller pie.

(A) The increase in the pharmaceutical division's contribution to corporation profits could have resulted largely from the introduction of single, important new product. - Irrelevant - it does not dispute the claim that pharmaceutical division is growing stronger

(B) In multidivisional corporations that have pharmaceutical divisions, over half of the corporation's profits usually come from the pharmaceuticals. - Irrelevant - we are concerned about this company only.

(C) The percentage of the corporation's profits attributable to the pharmaceutical division could have increased even if that division's performance had not improved. - Correct

(D) The information cited does not make it possible to determine whether the 20 percent share of profits cited was itself an improvement over the year before. - Incorrect - we are only concerned in comparing the last 2 years

(E) The information cited does not make it possible to compare the performance of the chemical and pharmaceutical divisions in of the percent of total profits attributable to each. - may be true, but its not the issue

Answer C

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(C) The percentage of the corporation's profits attributable to the pharmaceutical division could have increased even if that division's performance had not improved.

pharmaceutical division could have done poorly also

previous year profit : chemical 60 million ,phar 20 million
this year : chemical 20 million ,phar 15 million

percentage is higher /// the actual number is lower

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I did not understand the main argument of the question. Also , how to decide between C and D

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How does option D not weaken the conclusion? The 20 percent share of profits cited was itself an improvement over the year before ONLY if the profits increased or stayed constant. What if the profits decreased then the increase in percentage (from 20 to 45) will not be sufficient in and of itself since actual numerical profits from the chemical division could have fallen?

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nepr9

D doesn't weaken the conclusion because it's irrelevant.

We're told the pharmaceutical division contributed 45% of the corporation's profits, up from 20% of the previous year.

So D is saying that it's not possible to determine whether that 20% was itself an improvement over the year before. So now we're talking about two years back.

We don't care about what happened two years ago.

It's interesting to note that the percentages have changed since the original question was posted (see mikemcgarry's response)

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Hi Experts,

Please can you advise what Option E means?

As per my understanding the option states that the passage hasn't provided us with enough information to compare the profits of both the divisions in terms of percentages. This is incorrect as we are given the percentage share of both the divisions in the total profits of the corporation and thus we are given enough information to compare them.

Thanks
Kitty

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Corporate Officer: Last year was an unusually poor one for our chemical division, which has traditionally contributed about 60 percent of the corporation's profits. It is therefore encouraging that there is the following evidence that the pharmaceutical division is growing stronger: it contributed 45 percent of the corporation's profits, up from 20 percent the previous year.

On the basis of the facts stated, which of the following is the best critique of the evidence presented above?

(A) The increase in the pharmaceutical division's contribution to corporation profits could have resulted largely from the introduction of single, important new product. - This is simply a reason why pharmaceutical division's contribution increased. Not a critique of the evidence

(B) In multidivisional corporations that have pharmaceutical divisions, over half of the corporation's profits usually come from the pharmaceuticals. - General statement, not a critique of the evidence

(C) The percentage of the corporation's profits attributable to the pharmaceutical division could have increased even if that division's performance had not improved. - CORRECT

(D) The information cited does not make it possible to determine whether the 20 percent share of profits cited was itself an improvement over the year before. - Non improvement over the year before doesn't critique the argument given

(E) The information cited does not make it possible to compare the performance of the chemical and pharmaceutical divisions in of the percent of total profits attributable to each. - Information in the argument is comparing the performance

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KittyDoodles

Two points on E.

1) We are discussing on EVIDENCE, which just talks of Chemical division. Thus, comparison of chemical and pharmaceutical division does not help our analysis of evidence produced.
2) Are we given profits % to compare profits of these two divisions. The answer is NO, and so E is valid statement, although unrelated to our search for a correct answer.
Pharmaceutical: 60% is the traditional profit but last year was POOR one for pharmaceutical. So, we know traditional, but surely last year was poor and nothing about
this year
Chemical: Last year 20% and this year 45%. Nothing prior to last year.
So, no COMMON period to compare the %.

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nepr9

C is logically wrong. It says - "The percentage of the corporation's profits attributable to the pharmaceutical division could have increased even if that division's performance had not improved".

This "could have increased" is not possible as the argument tells the Pharma this year contributed 45% of the corporation's profit. This means that 55% left for any other division to contribute at MAX.
The argument says that usually chemical division contributed 60% and the performance last year was unusually poor meaning it will likely be lower than 60%, at most it can be 55%, which still makes it impossible for C to hold.

I think the OA needs to be D. I Picked D thinking that the two years data was not sufficient to say it is growing stronger just based on a single year performance, what it the year is an outlier itself? Based on the one year data we cannot say a trend ..... can we?

GMATNinja AndrewN egmat please advise ... this question and picking answer choice b/w C and D driving me crazy ...

Also, how to identify "Out of Scope" or "Irrelevant" answer choices? Is there a process?

Thanks.

The OA has to be D.

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IN2MBB2PE

Basshead

nepr9

C is logically wrong. It says - "The percentage of the corporation's profits attributable to the pharmaceutical division could have increased even if that division's performance had not improved".

This "could have increased" is not possible as the argument tells the Pharma this year contributed 45% of the corporation's profit. This means that 55% left for any other division to contribute at MAX.

The argument says that usually chemical division contributed 60% and the performance last year was unusually poor meaning it will likely be lower than 60%, at most it can be 55%, which still makes it impossible for C to hold.

I think the OA needs to be D. I Picked D thinking that the two years data was not sufficient to say it is growing stronger just based on a single year performance, what it the year is an outlier itself? Based on the one year data we cannot say a trend ..... can we?

GMATNinja AndrewN egmat please advise ... this question and picking answer choice b/w C and D driving me crazy ...

Also, how to identify "Out of Scope" or "Irrelevant" answer choices? Is there a process?

Thanks.

The OA has to be D.

The problem is that we don't know anything about the company's other divisions or about the total profits year to year. If total profits dropped significantly, it's certainly possible that the percentage from the pharma division would go up even if profits from that division were unchanged.

Here, have an example.

Year 1 (total profit = $45 million):

pharmaceutical division: 20% ($9 million)
chemical division: 60% ($27 million)
other divisions: 20% ($9 million)

Year 2 (total profit = $20 million):

pharmaceutical division: 45% ($9 million - unchanged from last year)
chemical division: 20% ($4 million - an unusually poor year for that division)
other divisions: 35% ($7 million)

As for (D), remember that the chemical division traditionally contributes 60%. That means that, at most, the pharma division typically contributes 40%. In that case, 45% would still represent an increase.

Sure, the 20% could have been an outlier. But given that 45% is (1) a significant increase from last year and (2) higher than the traditional/typical percentage, how that 20% compares to the year before doesn't really affect the author's argument.

I hope that helps!

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C is the clear winner because drop in chemical division's profit could have naturally increased the share of profit of other divisions(in this case Pharmaceutical) even if there is no change in profits of pharma in $ terms. It is a clear case of % contribution doesnt mean improvement in profits.

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First, a kind request if the moderator can correct option E - the "terms" is missing, and it causes some confusion in understanding the sentence. Thanks.
Understanding the argument -
It says that last year, the chemical division's (CD) performance was bad. Earlier, it used to contribute to 60% of the profits. (no further information on CD).
Then it says that the pharmaceutical division's (PD's) earlier contribution was 20%, and now it's 45%, so it is growing stronger.

The argument missed the possibility that the percentages could have changed because the overall pie has reduced. E.g.,
The previous year (before the LY), the profits were as follows: units
CD - 60 units
PD - 20 units
Other Divisions (OD) - 20 units
In overall 100, PD's contribution is 20%

LY
CD - 4 units
PD - 20 units
Other Divisions (OD) - 20 units
In overall 44, PD's contribution is 45%

Did the PD grow stronger? No. It performed the same. But just because the overall profit declined, the PD percentage looks better. And that's what option C highlights.

Option Elimination -

(A) The increase in the pharmaceutical division's contribution to corporation profits could have resulted largely from the introduction of single, important new product. We aren't even going there yet. First, we ask the basic question, "Did the PD grow"? So, this option is out of scope.

(B) In multidivisional corporations that have pharmaceutical divisions, over half of the corporation's profits usually come from the pharmaceuticals. Doesn't matter what happens in other multinational corporations; it is out of scope.

(C) The percentage of the corporation's profits attributable to the pharmaceutical division could have increased even if that division's performance had not improved. - Yes, that's what we highlighted.

(D) The information cited does not make it possible to determine whether the 20 percent share of profits cited was itself an improvement over the year before. The improvement over the year before is out of scope.

(E) The information cited does not make it possible to compare the performance of the chemical and pharmaceutical divisions in terms of the percent of total profits attributable to each. - The issue with this option is that while it tells the truth, it is still possible that the PD grew.

Let me share that with an example -

LY (Scenario 1) - PD doesn't grow
CD - 4 units - 4%
PD - 20 units - 45%
Other Divisions (OD) - 20 units
In overall 44, PD's contribution is 45

LY (Scenario 2) - PD grows
CD - 8 units - 4%
PD - 90 units - 45%
Other Divisions (OD) - 102 units
Overall, PD's contribution is 45

So, saying "does not make it possible" is something we can't say with 100% confidence. The data may or may not have helped. On the contrary, option C directly finds a flaw, citing Scenario 1.

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karun_aggarwal

Premises:

Last year was an unusually poor one for our chemical division, which has traditionally contributed about 60 percent of the corporation's profits.

Pharmaceutical division contributed 45 percent of the corporation's profits, up from 20 percent the previous year.  

Conclusion:

It is encouraging that the pharmaceutical division is growing stronger.

The officer shares that the chemical division fared badly last year, contributing less than usual to the profits but the pharmaceutical division contributed much more than it usually does. So, it is encouraging that the pharmaceutical division is growing stronger. We need to critique the evidence presented above. It is possible that the pie (overall profit figure) has reduced and that is why the share of the pharmaceutical division has increased even though the pharmaceutical division hasn’t really grown stronger. Since we know that chemical division, which normally provides about 60% of the profits performed poorly, it is quite likely that the overall profits have reduced. Hence even if the pharmaceutical division has performed the same as before, it could be responsible for a higher contribution to the profits. Let’s look at the options.

A. The increase in the pharmaceutical division's contribution to corporation profits could have resulted largely from the introduction of single, important new product.  

It does mean that the pharmaceutical division has grown stronger - whether one product was responsible or many is irrelevant.  

B. In multidivisional corporations that have pharmaceutical divisions, over half of the corporation's profits usually come from the pharmaceuticals.   

Irrelevant to our argument. How much the pharmaceutical divisions of other corporations contribute is irrelevant. We need to see whether our pharmaceutical division is improving compared with its performance in previous years.   

C. The percentage of the corporation's profits attributable to the pharmaceutical division could have increased even if that division's performance had not improved.   

As we discussed above, if the overall profits reduced, the share of pharmaceutical division could have increased without an actual increase in its performance. Let’s take some numbers to understand how this is possible. For example, say last year total profits were $100 of which $20 came from pharmaceutical division (and $60 from chemical division). This year’s total profits are $45 (since chemical division performed poorly, it showed a profit of $5 only) out of which again $20 came from pharmaceutical division. The performance of the pharmaceutical division did not change but its percentage of the corporation's profits did increase from 20% to almost 45%. This is a critique of the evidence presented.  
Correct.

D. The information cited does not make it possible to determine whether the 20 percent share of profits cited was itself an improvement over the year before.   

What happened last year compared with last to last year is irrelevant.   

E. The information cited does not make it possible to compare the performance of the chemical and pharmaceutical divisions in of the percent of total profits attributable to each.

Irrelevant to our argument. We don’t need to compare the performance of the two divisions. We need to compare their performances with their own performances of last year.

Answer (C)

Discussion on Weaken Questions: https://youtu.be/EhZ8FKkfy0k

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