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

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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.

(B) For the period at issue, Denoma’s major competitors reported declines in revenue that were, in percentage terms, greater than Denoma’s.

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

(D) Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.

(E) During the period, consumer-electronics retailers sold remaining units of Denoma’s superseded models at prices that were deeply discounted from those models’ original prices.

Originally posted by gmatpunjabi on 05 Jan 2012, 21:17.
Last edited by hazelnut on 01 Oct 2017, 00:43, edited 1 time in total.
Edited the question.
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New post 06 Jan 2012, 18:22
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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!
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New post 06 Jan 2012, 02:19
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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.
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New post 06 Jan 2012, 22:12
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+1 C
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New post 07 Jan 2012, 06:26
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+1 C
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New post 10 Jan 2012, 12:14
Sorry about he late reply. @ChrisLele and @d3thknell Thank you so much for your posts. This really makes sense now. Basically I understand partially what happened. D's overall Sales Revenue Decreased, but the Sales of certain Models increased. I understand how Choice C explains at a basic level. But I dont see how the Answer has any effect on "Sales of Certain Models Increased"
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New post 11 Jan 2012, 02:38
the answer should be able to sufficiently resolve the paradox given in the question.don't u agree option C does that?
it is true that C does not explain why sales of certain models increased,but that is outside the scope of question.
However the last line of the para says " their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced"
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Re: Denoma, a major consumer-electronics maker, had a sizeable decline in  [#permalink]

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New post 21 Apr 2012, 06:58
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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.
B. For the period at issue, Denoma’s major competitors reported declines in revenue that were, in percentage terms, greater than Denoma’s.
C. A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers.
D. Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.
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.
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New post 21 Apr 2012, 19:43
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C is right.

Given argument tells that, in spite of increase in sell of Denoma products, the overall revenue decreased. So we should look for answer choice which gives answer of this 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. - this could reason the increased sale but not the decreased revenue, hence wrong.

B. For the period at issue, Denoma’s major competitors reported declines in revenue that were, in percentage terms, greater than Denoma’s. - out of scope, wrong

C. A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers. - correct. the significant potrion of revenue is not related to sale of Denoma brand goods.

D. Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak. - neutral choice.

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. - [color=#FF0000]- out of scope, wrong[/color
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New post 25 Jun 2012, 23:35
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I was caught between C and E.

I chose E, because I considered the following assumptions:

1. Retailers made sizeble purchases of Denoma's products last year.
2. Only one product was sold full price by retailers the previous year.
3. As Retailers wanted to rid themselves of the non selling stock, they offered a deep discount.
4. Retailers sold all of their Denoma's Stock, and therefore made more Revenues of Denoma's products than previous year.

Nevertheless, after reading the stimulus again, I realized that E can not be, as the sales that retailers report grew largely thanks to some innovative and popular models that Denoma Introduced.

C it is... I guess the next time I get caught between 2 options I will look back again to the stimulus to find some scope narrowing wording.

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New post 26 Jun 2012, 04:08
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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.
advertising spends is irrelevant
B. For the period at issue, Denoma’s major competitors reported declines in revenue that were, in percentage terms, greater than Denoma’s.
retailers have not reported a positive growth for Denoma as comapred to competitors but a growth in Denoma models as compared to past year Denoma sales .
C. A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers.
Only plausible option for increment in Denoma's sales .
D. Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.
does not support statement that Denoma sales increased
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
The retailers report sales of innovative models which have been recently introduced
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New post 26 Jun 2012, 06:55
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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 22 Sep 2012, 13:17
E is irrelevant.

The argument is that the sales of electronic retailers increased from INNOVATIVE and POPULAR models so the discussion superseded models is irrelevant to the argument.
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New post 19 Jul 2013, 08:48
Totally missed the innovative models part and fell for the E trap choice. Good question
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New post 21 Jul 2013, 07:35
But what is wrong with C.
I see that the revenue has declined, but the retail sales have increased. Now we have to fill this gap. It can be filled with the advertising costs. And also the statement clearly says "thanks to new models" . It means that there are new models which did come. However, if manufacturing of other spare parts is concerned, I think it is irrelevant. It might be it is gaining for those spare parts, charging the same amount from the companies as earlier, and the other companies, in spite of already being in loss, may be buying those parts at more prices. How can you be certain on this?

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 11 Feb 2014, 23:32
fozzzy wrote:
Totally missed the innovative models part and fell for the E trap choice. Good question


Yeah, I miss the same point. Good question.
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New post 20 Oct 2014, 08:49
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!



i am not clear on this.
C may clear about the reasons for increased sales of the retailers. It definitely does not clear the fact as to why did Denoma experience a decrease in its revenue..

E where as clears both the reaons viz why did the retailers have an increase in their sales and why did Denoma experience a decrease in its revenue
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New post 20 Oct 2014, 17:34
The winner is 'C' but the reasoning outlined above by Chris is flawed. The argument does not talk about profits. The argument clearly talks about revenue. The answer is C because the author is implying that company D's main revenue source is from making parts/components for other Electronic companies. If that is the case then fewer pieces of electronics sold (other companies') = fewer parts required to be manufactured by company D. HTH!
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New post 30 Nov 2015, 23:07
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.
B. For the period at issue, Denoma’s major competitors reported declines in revenue that were, in percentage terms, greater than Denoma’s.
C. A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers.
D. Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.
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.


Such a great Q. In official questions there is always a consistency. However convoluted the prompt seems to be, hints needed to solve the problem is always there, often hidden, but without fail.
In this Q the highlighted part is that hint. We know:
1. Denoma's revenue dropped significantly.
2. Retailers are saying just the opposite, but
3. Overall sales were considerably lower than in the previous year.

To resolve the paradox, basically, we got to find a link between Denoma's revenue and point 3.
C does that for us, nicely. Denoma's revenue is majorly constituted by producing parts for OTHERS, who have their sales drooping. Bingo!!

Thanks.
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New post 02 Dec 2015, 04:40
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.
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