Due to recent success, Lawton, a contractor, can be more selective

Question

Due to recent success, Lawton, a contractor, can be more selective than in the past regarding the types of clients he chooses to service. If he restricts his business to commercial clients and only those residential clients requiring $10,000 of work or more, he would cease doing most of the kind of residential work he currently does, which would allow him to earn a higher average profit margin per job.

Which of the following, if true, would most strengthen the conclusion that limiting his service in the manner cited would increase Lawton’s average profit margin per job?

A. Lawton’s recent success is due primarily to an upsurge in the number of residential clients he services.

B. Lawton’s commercial clients would prefer that he focus more of his time and energy on their projects and less on the concerns of his residential clients.

C. Residential work for which Lawton cannot bill more than $10,000 comprises a significant proportion of his low-profit-margin work.

D. Due to the use of a more efficient cost-accounting system, Lawton’s average profit margin per job has increased in each of the last three years.

E. Commercial jobs typically take longer to complete than residential jobs.

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laborumplaceat · Answer

We have to strengthen ->  limiting service will lead to higher profit per job

A. Says his success comes from residential clients.
Irrelevant. Success ≠ profit margin.

B. Commercial clients want more attention.
Doesn’t address profit margins.

C.Residential work under $10,000 constitutes a large share of his low-profit-margin work.
This says:  The exact jobs he would eliminate are exactly the low-margin ones. 
 Removing low-margin jobs increases average margins. 
This directly strengthens the conclusion.

D. His profit margin has risen recently.
That doesn’t tell us whether restricting clients will further raise average margin.

E. Commercial jobs take longer.
Nothing about profitability or margin.

Conclusion
C directly ties the jobs he would eliminate to low-profit-margin work, which makes the conclusion (that his average margin will go up if he drops them) more convincing.

Correct Answer: C

Geethikareddy · Answer

Correct answer C 
In order to earn high margin he would eliminate low margin profit jobs. Therefore,

residential work for which Lawton cannot bill more than $10,000 comprises a significant proportion of his low-profit-margin work.

AbhishekP220108 · Answer

Here is the breakdown of the argument, followed by the analysis of the options.
Part 1: Deconstruction & Visualization
 Sentence 1

What it Says:  Lawton is doing well and has the luxury of picking his customers. 
  What it Does:  Sets the  Context . 
  What it Is:  Background Information.  
 Sentence 2 (The Plan)

What it Says:  He is firing all residential customers who spend less than $10k. He is keeping Commercial + Big Residential. 
  What it Does:  Defines the  Proposed Strategy . 
  What it Is:  Premise (The Condition). 
  Visualization:  Lawton holding a sieve. He pours all his potential jobs into it. The small rocks (small residential jobs) fall through the holes and are discarded. The big rocks stay.  
 Sentence 2 (The Consequence)

What it Says:  Dropping those small jobs will make his overall efficiency (average margin) go up. 
  What it Does:  Predicts the  Outcome . 
  What it Is:  Main Conclusion. 
  Visualization:  A bar graph of "Profit Margins." The author erases the short bars on the left, causing the "Average Line" to float higher.

Part 2: Pre-thinking the Assumption
The argument relies on a mathematical property of  Averages . To raise an average, you must either:
 
 Add numbers  above  the current average. 
 Remove numbers  below  the current average.  
The plan involves  removing  a specific group: Residential jobs under $10,000.  The Assumption:  The author assumes that these small jobs are indeed the "bad numbers" (Low Margins).

Trap:  A job can be small in  revenue  ($500) but huge in  margin  (90% profit). If Lawton cuts these small but highly profitable jobs, his average margin would actually drop.

Part 3: Selecting the Answer
The correct answer is  (C) .
 Why (C) Works

The Logic:  This confirms that the jobs being "fired" are indeed the ones dragging the average down. 
  The Math:  If you kick the "low margin" jobs out of the pool, the average of the remaining pool mathematically  must  rise. This directly strengthens the mechanism of the conclusion.  
 Why the Others Fail 
 
  (A) Upsurge in clients:  This explains  why  he can be selective, but it doesn't tell us if being selective is  profitable . 
  (B) Commercial client preference:  This suggests commercial clients might be happier, but "happiness" doesn't automatically translate to "higher profit margin per job." 
  (D) Past accounting success:  This establishes a historical trend unrelated to the specific plan. Just because margins rose in the past doesn't prove  this specific strategy  will make them rise further. 
  (E) Duration of jobs:  "Time" is not "Margin." A job can take 6 months and have a 2% margin, or 1 day and have a 50% margin. Knowing that commercial jobs take longer doesn't tell us if they are more  profitable .

Dereno · Answer

Lawton is a contractor, and has been experienced success recently. Due to this, he can change his previous style of working to accommodate clients on selection basis. So, previously as a contractor Lawton usually catered to the needs of all clients across the entire spectrum of customer base.

Now, Lawton decides to focus ONLY on  Commercial clients  and  Residential clients (Work budget >= $10,000).

This shift in focus to high profile clients, mandates a reduction in the number of residential clientele previously handled. As, the word MOST , mentions a greater share of his work was from residential clients, that too with work budget less than $10,000.

What is Lawton gaining from this shift ?

Increase in average profit per jobs handled. So, prior to shift, to reach a profit of 500k, Lawton with work earnings less than $10k should work for more clients. Now, with the work earnings pegged over $10k, the number of clients catered would be less, but the profit margin could have been reached or even higher.

We need to find an option -  would most strengthen the conclusion that limiting his service in the manner cited would increase Lawton’s average profit margin per job.

A. Lawton’s recent success is due primarily to an upsurge in the number of residential clients he services.

This cannot be sure. The success is a qualitative terminology, and cannot be quantified. It can be either, the upsurge in residents
Clients, or can be the new profit margin he has crossed. Moreover, this doesn’t explain the increase in average profit margin per job due to limited service. Which the aftermath of the shift. The option speaks about the past. Hence, wrong.

B. Lawton’s commercial clients would prefer that he focus more of his time and energy on their projects and less on the concerns of his residential clients.

This option discusses the needs of the two different clients - residential vs commercial. But, there is a subset within the residential clients too. This option goes out of context. Hence, Wrong.

C. Residential work for which Lawton cannot bill more than $10,000 comprises a significant proportion of his low-profit-margin work.

This clearly explains the reason behind the low profit margin experienced previously, as the billing rate is confined due to the work done. But, with the shift, the average profit margin per job is expected to rise. As lesser high value jobs would ensure the profit is achieved within a shorter timeframe. Hence, Correct.

D. Due to the use of a more efficient cost-accounting system, Lawton’s average profit margin per job has increased in each of the last three years.

This option brings a new player of accounting and charted accountants who helped to adjust the profit figures. This is irrelevant. Hence, Wrong.

E. Commercial jobs typically take longer to complete than residential jobs.

The time Frame or man power used etc, or not discussed. Completely out of scope. Wrong.

Option C

Bunuel · Answer

KAPLAN OFFICIAL EXPLANATION

Step 1: Identify the Question Type

In addition to containing the telltale word “strengthen,” the question stem helps you by identifying the conclusion. When the GMAT gives you a gift like this, acceptit!

Step 2: Untangle the Stimulus

The conclusion has been handed to you by the question stem: by restricting his work to commercial projects and expensive ($10,000+) residential projects, Lawton will increase his average profit margin. The only evidence is the first sentence, which informs you that due to recent success, Lawton can restrict his work to certain clients if he chooses.

Step 3: Predict the Answer

The evidence proves that Lawton can be selective. However, it does not establish that restricting his business will actually improve his profit margin. The author’s claim depends on an assumption: inexpensive residential jobs have lower profit margins than do commercial jobs and pricey residential jobs.

Step 4: Evaluate the Choices

Choice (C) supports the assumption, thereby strengthening the argument, and is the correct answer.

Wrong answer choices on Strengthen and Weaken questions commonly provide facts that are irrelevant to the argument; since such choices have no direct bearing on the argument presented, there’s no way they could strengthen or weaken it. (A) is incorrect because the source of Lawton’s recent success is irrelevant and has no connection to higher profit margins. (B) discusses the preferences of Lawton’s commercial clients, which are also irrelevant. (D) credits a new accounting system with an increase in Lawton’s profit margin per job. This statement doesn’t tell us whether expensive jobs have a higher profit margin than do small residential jobs, so it doesn’t help the argument. Furthermore, (D) focuses on past improvements, which have no bearing on whether his future plans will be successful. (E) tells us that commercial jobs will take longer to complete, but the profit margin of the jobs, not their duration, is what matters in this argument.

Due to recent success, Lawton, a contractor, can be more selective

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Due to recent success, Lawton, a contractor, can be more selective

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