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CR-MGMAT.

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CR-MGMAT. [#permalink]

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New post 12 Aug 2008, 08:40
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got this CR question on the MGMAT-5 but I guess answers are doubtful. Please see the question below-

On Monday, Daisy's Lemonade Stand sold lemonade at 20 cents per cup. The Lemon Shack sold lemonade at 30 cents per cup. At the end of the day, Daisy's Lemonade Stand and the Lemon Shack reported identical revenues and identical profits.

The statements above best support which of the following assertions?
a> On Monday, Daisy's Lemonade Stand sold fewer cups of lemonade than did the Lemon Shack.
b> The Lemon Shack sells higher quality lemonade than does Daisy's Lemonade Stand.
c> On Monday, Daisy's Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.
d> In general, lemonade consumers prefer the lemonade at Daisy's Lemonade Stand to the Lemonade at the Lemon Shack.
e> The Lemon Shack would not increase its revenues by lowering its prices.

Please help me solving this question.

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Re: CR-MGMAT. [#permalink]

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New post 12 Aug 2008, 08:47
C.

The 2 lemonade stands had the identical revenue according to the stem and identical profits. This means the difference between revenue and profits is the cost of doing business. It has to be the same if revenue is equal and profits are equal. It may seem that Daisy's had to sell more cups so it's costs couldn't be the same as The Lemon Shack, but that's an assumption unsupported by the stem. Fact is Revenue - Cost = Profit. If each have $100 revenue and $60 profit (picking numbers), their costs must be equal, regardless of how those costs are incurred.

marshpa wrote:
got this CR question on the MGMAT-5 but I guess answers are doubtful. Please see the question below-

On Monday, Daisy's Lemonade Stand sold lemonade at 20 cents per cup. The Lemon Shack sold lemonade at 30 cents per cup. At the end of the day, Daisy's Lemonade Stand and the Lemon Shack reported identical revenues and identical profits.

The statements above best support which of the following assertions?
a> On Monday, Daisy's Lemonade Stand sold fewer cups of lemonade than did the Lemon Shack.
b> The Lemon Shack sells higher quality lemonade than does Daisy's Lemonade Stand.
c> On Monday, Daisy's Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.
d> In general, lemonade consumers prefer the lemonade at Daisy's Lemonade Stand to the Lemonade at the Lemon Shack.
e> The Lemon Shack would not increase its revenues by lowering its prices.

Please help me solving this question.

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J Allen Morris
**I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a$$.

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Kudos [?]: 607 [0], given: 32

Senior Manager
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New post 12 Aug 2008, 09:05
marshpa wrote:
got this CR question on the MGMAT-5 but I guess answers are doubtful. Please see the question below-

On Monday, Daisy's Lemonade Stand sold lemonade at 20 cents per cup. The Lemon Shack sold lemonade at 30 cents per cup. At the end of the day, Daisy's Lemonade Stand and the Lemon Shack reported identical revenues and identical profits.

The statements above best support which of the following assertions?
a> On Monday, Daisy's Lemonade Stand sold fewer cups of lemonade than did the Lemon Shack.
b> The Lemon Shack sells higher quality lemonade than does Daisy's Lemonade Stand.
c> On Monday, Daisy's Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.
d> In general, lemonade consumers prefer the lemonade at Daisy's Lemonade Stand to the Lemonade at the Lemon Shack.
e> The Lemon Shack would not increase its revenues by lowering its prices.

Please help me solving this question.


A) -> No
B) -> Out of place
C) -> Yes identical revenues and identical profits means identical costs to run their business
D) -> Nopes we are only talking about Monday
E) -> Out of place

IMO C)

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Re: CR-MGMAT. [#permalink]

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New post 12 Aug 2008, 09:17
jallenmorris wrote:
C.

The 2 lemonade stands had the identical revenue according to the stem and identical profits. This means the difference between revenue and profits is the cost of doing business. It has to be the same if revenue is equal and profits are equal. It may seem that Daisy's had to sell more cups so it's costs couldn't be the same as The Lemon Shack, but that's an assumption unsupported by the stem. Fact is Revenue - Cost = Profit. If each have $100 revenue and $60 profit (picking numbers), their costs must be equal, regardless of how those costs are incurred.

marshpa wrote:
got this CR question on the MGMAT-5 but I guess answers are doubtful. Please see the question below-

On Monday, Daisy's Lemonade Stand sold lemonade at 20 cents per cup. The Lemon Shack sold lemonade at 30 cents per cup. At the end of the day, Daisy's Lemonade Stand and the Lemon Shack reported identical revenues and identical profits.

The statements above best support which of the following assertions?
a> On Monday, Daisy's Lemonade Stand sold fewer cups of lemonade than did the Lemon Shack.
b> The Lemon Shack sells higher quality lemonade than does Daisy's Lemonade Stand.
c> On Monday, Daisy's Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.
d> In general, lemonade consumers prefer the lemonade at Daisy's Lemonade Stand to the Lemonade at the Lemon Shack.
e> The Lemon Shack would not increase its revenues by lowering its prices.

Please help me solving this question.


My logic was since Daisy's lemonade sold more cups so we can assume that D is correct. C I thought was incorrect based on the information provided in the para.

Kudos [?]: 90 [0], given: 4

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Kudos [?]: 607 [0], given: 32

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Re: CR-MGMAT. [#permalink]

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New post 12 Aug 2008, 09:29
How do we know the customers perferred the lemonade and not just the price?
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**I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a$$.

GMAT Club Premium Membership - big benefits and savings

Kudos [?]: 607 [0], given: 32

Senior Manager
Senior Manager
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Joined: 26 Mar 2008
Posts: 317

Kudos [?]: 90 [0], given: 4

Location: Washington DC
Re: CR-MGMAT. [#permalink]

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New post 12 Aug 2008, 09:57
One or other same thing.. Daisy sold more lemonade cups than Lemon shack.

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New post 12 Aug 2008, 09:59
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marshpa wrote:
One or other same thing.. Daisy sold more lemonade cups than Lemon shack.


Marshpa D) says "In general" whereas data is given for only Monday so D) cant be the answer.

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Re: CR-MGMAT. [#permalink]

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New post 12 Aug 2008, 10:01
But that doesn't mean the customer's choice was based upon the lemonade. I've purchased many food items simply because it was cheaper...Dollar menu at McDonald's. It doesn't mean I prefer the McD's cheeseburger to the Whopper. It could be that I didn't want to pay the $3 the whopper costs and I'd settle for the cardboard burger for $1.

The question asks "The statements above best support which of the following assertions?" We know that the $0.20 cups sold more, but we aren't told anything about WHY.

marshpa wrote:
One or other same thing.. Daisy sold more lemonade cups than Lemon shack.


EDIT: Great point nmohindru! +1
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J Allen Morris
**I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a$$.

GMAT Club Premium Membership - big benefits and savings

Kudos [?]: 607 [0], given: 32

Senior Manager
Senior Manager
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Joined: 06 Apr 2008
Posts: 432

Kudos [?]: 164 [0], given: 1

Re: CR-MGMAT. [#permalink]

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New post 12 Aug 2008, 10:03
Thanks Jallen :-D

Kudos [?]: 164 [0], given: 1

Senior Manager
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Re: CR-MGMAT. [#permalink]

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New post 12 Aug 2008, 10:38
Good point +1 to you mohindru.
Thanks to you Jallen and mohindru for solving this question.

Kudos [?]: 90 [0], given: 4

Re: CR-MGMAT.   [#permalink] 12 Aug 2008, 10:38
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