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Denoma, a major consumer-electronics maker, had a sizeable decline in

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New post 02 Dec 2015, 05:07
koreye wrote:
my main gripe with option C, and many CR questions, is that you have to make assumptions to arrive at the conclusion. Just because D makes parts for other manufacturers should not in itself explain the loss of revenue, because nothing in the passage or the option indicates that to be the case. You have to assume that thats where the revenue decline results from.


Hi koreye

A resolve the paradox question presents you a paradox or an apparent confusion and asks you to come up with a PLAUSIBLE solution. Now, as I understood from ur query, you can always doubt a solution that is feasible, right? No solution can give you 100% guarantee, which is not even asked to find out. The question asks to find the BEST feasible solution among the choices.
Sorry, if I am getting your query wrong.

Thanks.
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New post 04 Dec 2015, 06:22
binit wrote:
koreye wrote:
my main gripe with option C, and many CR questions, is that you have to make assumptions to arrive at the conclusion. Just because D makes parts for other manufacturers should not in itself explain the loss of revenue, because nothing in the passage or the option indicates that to be the case. You have to assume that thats where the revenue decline results from.


Hi koreye

A resolve the paradox question presents you a paradox or an apparent confusion and asks you to come up with a PLAUSIBLE solution. Now, as I understood from ur query, you can always doubt a solution that is feasible, right? No solution can give you 100% guarantee, which is not even asked to find out. The question asks to find the BEST feasible solution among the choices.
Sorry, if I am getting your query wrong.

Thanks.



Thanks
It was more a comment than a query, but you got it right. It's just that being a lawyer, I just don't like working with "Plausibility". Just not good enough for me lol.
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New post 04 Dec 2015, 08:20
koreye wrote:
Thanks
It was more a comment than a query, but you got it right. It's just that being a lawyer, I just don't like working with "Plausibility". Just not good enough for me lol.


Hi,
I am sorry. I agree that I should develop an eye to tell a comment from a query. I must say, you are in a wonderful profession and I'll look forward to learn from you, for I believe, you must be handling real-life, complex arguments on a regular basis.

Thanks.
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Re: Denoma, a major consumer-electronics maker, had a sizeable decline in  [#permalink]

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New post 12 Sep 2016, 14:15
vaibhav123 wrote:
ChrisLele wrote:
So let’s take apart the argument.

Denoma (D.), a consumer-electronic maker, has seen a decrease in sales in the past year. However, D. provides products to retailers, which saw an increase in the sale of D.’s products. How to account for this?

Well, maybe D.’s profits are not solely determined by the number of its products users are able to sell. Maybe, D. creates parts for products that do not have the D. label on them.

For example, let’s say retailers sold D.s new line of home stereos. Units flew off the shelf. However, D. makes a number of parts for many televisions, which do not have the D. label (let’s say for Sony, Panasonic and the rest) If most of D.’s profits are determined by the sale of televisions, then if televisions had a bad year, D.’s profits will decline. This is the case, even with retailers selling plenty of D’s stereos.

The only answer choice that captures this logic is (C).

Let me know that if that helped!



What is wrong with A)


Their advertisement is cutting into their profit but not necessarily affects their revenue.
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New post 11 Jul 2017, 09:41
Thanks for the crisp explanation :)

Regards,
Abhishek SInha

thevenus wrote:
Ofcourse C

Let's keep it short and simple, the argument states that:
-Overall revenue of company has declined BUT
-The retail sales has done good business
It means that, the overall decremented revenue is not directly related to the retail sales ONLY.Something else is responsible for the overall sales/revenue decline.

Only C states that a substantial revenue is dependent on something else too ( "A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers.")
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New post 12 Jan 2019, 11:33
Hey nightblade354

Need your help. I am confused between option A and C

I discarded option C for the below reason and went ahead with option A. Let me know yourthoughts

Option C : - A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers.

Components are sold by denoma to other manufacturers. It means, denoma already received the money for the same. If the other manufacturers didnt sell them then this situation shouldnt be affecting denoma. We will have to assume that denoma will receive the money for the components they made only if the other manufacturers sold their respective products. Hence I ruled out C
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New post 12 Jan 2019, 15:16
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pikolo2510, let's break the argument down.

Denoma, a major consumer-electronics maker, had a sizeable decline in sales revenue for its most recent fiscal year. This result appears surprising, because electronics retailers report that although their overall sales were considerably lower than in the previous year, their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced.

Which of the following, if true, does most to explain the apparently surprising result?

(A) Because of the need to educate the public about its new models’ capabilities, Denoma’s advertising spending was higher than normal over the period. -- What does the last portion mean when it says "higher than normal"? Does this mean by a penny, or by $50 billion? We cannot make this assumption and thus doesn't help our argument.

(C) A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers. -- Ah, so if their profits are deriven from something else, this would resolve the paradox.

Does this help?
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Re: Denoma, a major consumer-electronics maker, had a sizeable decline in  [#permalink]

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New post 16 Jan 2019, 05:14
nightblade354 wrote:
pikolo2510, let's break the argument down.

Denoma, a major consumer-electronics maker, had a sizeable decline in sales revenue for its most recent fiscal year. This result appears surprising, because electronics retailers report that although their overall sales were considerably lower than in the previous year, their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced.

Which of the following, if true, does most to explain the apparently surprising result?

(A) Because of the need to educate the public about its new models’ capabilities, Denoma’s advertising spending was higher than normal over the period. -- What does the last portion mean when it says "higher than normal"? Does this mean by a penny, or by $50 billion? We cannot make this assumption and thus doesn't help our argument.

(C) A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers. -- Ah, so if their profits are deriven from something else, this would resolve the paradox.

Does this help?


Hello nightblade354! :)

I had a small doubt!
We are mainly concerned with "Sales Revenue".
Do we really need to bother about an option that talks about advertising? Does it matter what happens to the revenue? Wether they spend it on advertising or something else?

I agree with your above explanation, but was curious if we could eliminate the option in any other way!

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New post 16 Jan 2019, 05:55
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Hi blitzkriegxX,

We cannot eliminate off of the premise you just mentioned. A failed advertising campaign could be expensive and worthless; this would resolve the paradox (revenue down, but sales up).
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New post 16 Aug 2019, 04:02
Why is A wrong? since D's advertising expenses were higher, its net profit was less and hence revenue was less. Doesnt it resolve the conflict?
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New post 16 Aug 2019, 19:49
d3thknell wrote:
the argument talks about an consumer electronics maker Denoma,which had a sizeable decline in sales revenue for that particular year. this result comes as a surprise to everyone because according to retailers of electronic goods( the people who sell electronics), although there was a decline in overall sales of electronic goods but the goods manufactured by denoma had increased sales revenue compared to last year. this was largely due to innovation and popularity of newly introduced models of denoma.

so what we have from the argument is basically
-increase in sales revenue from the models manufactured by denoma.
-overall decline in sales of electronic goods.
-overall decline in sales revenue for Denoma.
how can one explain this effect?
if we can assume denoma is also into manufacturing of parts for other electronic goods manufacturers and the revenue from these parts is is much more significant compared to revenue from denoma models, then the above three effects can be explained.


I feel like option C requires us to make an additional assumption.
Revenue = no. of units sold x price per unit.
Revenue decrease could be due to number of units sold decrease as mentioned in option C.
But we are assuming that revenue from components manufacture for other consumer electronics decreased.
We do not know if other consumer decreased their buying or consumption of Denoma componenets.

If we are making additional assumptions, E is also a strong contender because it says retailers sold them at discounted price.
we can assume - Denoma also had to sell them at a lesser price, which will reduce revenue.

Can anyone please explain if my reasoning is on the right lines? Why am i wrong? OR How do you approach it?
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New post 31 Aug 2019, 19:44
payalkhndlwl wrote:
Why is A wrong? since D's advertising expenses were higher, its net profit was less and hence revenue was less. Doesnt it resolve the conflict?

We're asked which choice does the most to explain the apparently surprising result (or as you put it, the conflict). But what is the conflict we're trying to explain?

Well, the result is that Denoma had a sizeable decline in sales revenue during its most recent fiscal year. We are not looking at net profit, which is typically calculated as gross income (including sales revenue, but potentially also including other sources of income) minus the cost of goods and services.

The conflict here is that Denoma had a sizeable decline in sales revenue over the fiscal year — but in the same year, retailers saw an increase in sales revenue from Denoma models.

Choice (A) states that Denoma's advertising spend was higher than normal over the period in question. But that doesn't explain the conflict that we're concerned with:

  • Again, this question is not about net profit.
  • Knowing that there was higher advertising spend doesn't give us any new information on why Denoma's overall sales revenue declined.

As nightblade354 and others have explained, choice (C) more directly addresses the conflict. If a significant proportion of Denoma's revenue comes from selling components to other manufacturers, then a decline in these sales to manufacturers could result in a decline in overall sales revenue — even at the same time as sales revenue from retailers grows.

This information does more to resolve the conflict than any other answer choice.

I hope this helps!
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New post 08 Sep 2019, 23:37
GMATNinja wrote:
payalkhndlwl wrote:
Why is A wrong? since D's advertising expenses were higher, its net profit was less and hence revenue was less. Doesnt it resolve the conflict?

We're asked which choice does the most to explain the apparently surprising result (or as you put it, the conflict). But what is the conflict we're trying to explain?

Well, the result is that Denoma had a sizeable decline in sales revenue during its most recent fiscal year. We are not looking at net profit, which is typically calculated as gross income (including sales revenue, but potentially also including other sources of income) minus the cost of goods and services.

The conflict here is that Denoma had a sizeable decline in sales revenue over the fiscal year — but in the same year, retailers saw an increase in sales revenue from Denoma models.

Choice (A) states that Denoma's advertising spend was higher than normal over the period in question. But that doesn't explain the conflict that we're concerned with:

  • Again, this question is not about net profit.
  • Knowing that there was higher advertising spend doesn't give us any new information on why Denoma's overall sales revenue declined.

As nightblade354 and others have explained, choice (C) more directly addresses the conflict. If a significant proportion of Denoma's revenue comes from selling components to other manufacturers, then a decline in these sales to manufacturers could result in a decline in overall sales revenue — even at the same time as sales revenue from retailers grows.

This information does more to resolve the conflict than any other answer choice.

I hope this helps!


Hi,

Compared to (E), doesn't (C) require us to make an extra assumption that the revenue of the other manufacturers declined as well ?

So what if Denoma's revenue comes from other manufacturers ? We don't know what happened to their revenue. That should be largely out of scope.

On the other hand, (E) states that older models (since stimulus clearly states that increase in sales was from newer models) were sold at a significantly lower price as compared to their original cost. The stimulus even states that 'largely' the number of units sold were newer. So this is a much smaller leap in assumption that enough number of older units were sold to have a sizeable impact on the overall revenue. (C) on the other hand asks a big leap in assumption that that the combined revenue of other sources decreased. While we can make that assumption, what's stopping us from assuming the required assumption for (E) i.e. enough older units were sold to make a considerable impact on revenue.

(C) would have made more sense, had the stimulus hinted that overall market saw decreasing revenues.

(C) isn't a no-brainer asnwer, or is it ? What it appears to refer to can easily be termed out-of-scope, no ?

Will appreciate your input.
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New post 19 Sep 2019, 15:48
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altairahmad wrote:
GMATNinja wrote:
payalkhndlwl wrote:
Why is A wrong? since D's advertising expenses were higher, its net profit was less and hence revenue was less. Doesnt it resolve the conflict?

We're asked which choice does the most to explain the apparently surprising result (or as you put it, the conflict). But what is the conflict we're trying to explain?

Well, the result is that Denoma had a sizeable decline in sales revenue during its most recent fiscal year. We are not looking at net profit, which is typically calculated as gross income (including sales revenue, but potentially also including other sources of income) minus the cost of goods and services.

The conflict here is that Denoma had a sizeable decline in sales revenue over the fiscal year — but in the same year, retailers saw an increase in sales revenue from Denoma models.

Choice (A) states that Denoma's advertising spend was higher than normal over the period in question. But that doesn't explain the conflict that we're concerned with:

  • Again, this question is not about net profit.
  • Knowing that there was higher advertising spend doesn't give us any new information on why Denoma's overall sales revenue declined.

As nightblade354 and others have explained, choice (C) more directly addresses the conflict. If a significant proportion of Denoma's revenue comes from selling components to other manufacturers, then a decline in these sales to manufacturers could result in a decline in overall sales revenue — even at the same time as sales revenue from retailers grows.

This information does more to resolve the conflict than any other answer choice.

I hope this helps!


Hi,

Compared to (E), doesn't (C) require us to make an extra assumption that the revenue of the other manufacturers declined as well ?

So what if Denoma's revenue comes from other manufacturers ? We don't know what happened to their revenue. That should be largely out of scope.

On the other hand, (E) states that older models (since stimulus clearly states that increase in sales was from newer models) were sold at a significantly lower price as compared to their original cost. The stimulus even states that 'largely' the number of units sold were newer. So this is a much smaller leap in assumption that enough number of older units were sold to have a sizeable impact on the overall revenue. (C) on the other hand asks a big leap in assumption that that the combined revenue of other sources decreased. While we can make that assumption, what's stopping us from assuming the required assumption for (E) i.e. enough older units were sold to make a considerable impact on revenue.

(C) would have made more sense, had the stimulus hinted that overall market saw decreasing revenues.

(C) isn't a no-brainer asnwer, or is it ? What it appears to refer to can easily be termed out-of-scope, no ?

Will appreciate your input.

We're not looking for a "no-brainer answer." We are selecting the answer choice that does most to explain the apparently surprising result.

This doesn't require us to confirm specific assumptions, as you've been trying to do in your analysis. We only need to identify the choice that does the most to make this surprising result logically believable.

The prompt tells us Denoma had a sizeable decline in sales revenue for its most recent fiscal year.. This is quite a broad statement by definition, so it covers anything that Denoma has sold to the "overall market," as you put it — including the sales of components to the consumer-electronics market. I'm not sure if this is what you meant when comparing the scope of (C) to the scope of the prompt, but in any case, it would be a mistake to assume that this decline in sales revenue only applies to specific product verticals.

Taking one more look at choice (E):

Quote:
(E) During the period, consumer-electronics retailers sold remaining units of Denoma’s superseded models at prices that were deeply discounted from those models’ original prices.

You're right that this is a very concrete story. But is it the story we care about?

Remember, we want the choice that does the most to raise logically valid possibilities for a sizable decline in sales revenue.

Putting (C) and (E) head to head, here's what we've got:

  • (C) confirms that there's an entirely different and significant portion of Denoma's sales portfolio (comopnents), which isn't even covered by the prompt. This raises the logical possibility that a decline in component sales accounts for the decline in overall sales. Sure, we don't have proof that this happened, but the scale of sales decline suggested in this choice matches the scale of the paradox we're trying to explain. That makes the paradox more logically believable.
  • (E) confirms that some portion of back stock of outdated models were sold at a discount alongside their innovative and popular models. This only tells us that... retailers sold off some old models at a cheaper price in addition to Denoma's great new models. Could this alone can explain why Denoma saw a sizable decline in overall sales revenue? Maaaaybe, but compared to the possible swing in revenue suggested in (C), this is weak sauce. It's a narrow data point covering what seems like a small proportion of sales — which does very little to make Denoma's overall decline in sales revenue more logically believable.

I hope this helps!
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Re: Denoma, a major consumer-electronics maker, had a sizeable decline in  [#permalink]

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New post 01 Dec 2019, 17:56
(E) During the period, consumer-electronics retailers sold remaining units of Denoma’s superseded models at prices that were deeply discounted from those models’ original prices.

E is incorrect. We are told that retailers report that Denomer models' sales are up this year. The paradox is that Denoma's sales (Denoma is a manufacturer) are down despite retailers' report. Denoma's sales comprise products sold to retailers and since we are already told that retailer's sales of denomer models are up, it doesn't matter whether some denoma models were discounted or sold at full price.

C on the other hand is correct and logically links whats going on. Retailer's sales of other non-denoma models are down. If those models are comprised of Denoma parts, then the demand for denoma parts would be down also, and since denoma makes a 'large proportion' of its revenue from such sales it would stand to justify that Denoma's sales this year are down despite the increase in sales of Denoma branded models.
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