Events & Promotions
|
|
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.
Customized
for You
Track
Your Progress
Practice
Pays
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Nov 2007:30 AM PST
-08:30 AM PST
Learn what truly sets the UC Riverside MBA apart and how it helps in your professional growth
PriyankGaur
Joined: 29 Jan 2019
Last visit: 23 May 2025
Posts: 10
Own Kudos:
Given Kudos: 40
Location: India
Schools: Darden '22 (D) ISB '21 (A)
GMAT 1: 720 Q49 V39
08 May 2019, 02:52
Kudos
Bookmarks
following memo was circulated by the management team of a retail company:
“We are very pleased to announce the relocation of our inventory, which had been located in four different warehouses throughout the country, to a single new warehouse near Company headquarters in Boston. This consolidated location will cut the company’s expenses for warehouse rent in half. As a result we expect our monthly profitability to go up by this amount.”
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
Your Response:
In the argument presented above, the author points out that the consolidation of the company's inventory will cut company's warehouse expenses in half and also increase the monthly profitability. Though in the first glance, the argument does seem air tight, but upon closer inspection, the author seems to have failed to address certain key questions that could make or break the argument. In reaching the final conclusion, the author also makes certain far fetched assumptions which might need reconsideration.
First of all, the author says that consolidating the 4 inventories into 1 would cut company's expenses for warehouse in half. This assumes that the cost of the new and bigger warehouse is half of the total expense of the 4 warehouses. Nothing in the argument suggests that this will be the case. It may be that the cost of the newer and bigger warehouse might be equal or greater than half of the total cost of the existing 4 warehouses,, in which case, the author's argument breaks down. The old warehouses could be in an area where the cost of land is low as compared to the land where the consolidated warehouse is. Or it can be the other way round. In any case, we cannot be certain, that this move will cut the company's expense for warehouse in half.
Secondly, the author claims that as a result of this consolidation, the monthly profitability would go up. The argument does have some basis to support this claim, but that too is a bit far fetched. Since, profit equals costs minus the revenue, we cannot comment on the profit unless we have information on both costs and revenue. The movement of inventory from 4 locations to 1 would certainly involve additional costs, so this casts serious doubts on the claim that profitability would certainly increase. Additionally, even if we assume that all the inventory from the 4 locations is retained, there is no evidence in the argument that supports the claim for increased revenues. Even if costs were reduced and the revenue were increased, we do not have any idea about their relative amounts, hence, we cannot definitely conclude that profitability would increase as a result of the consolidation of the inventory.
Overall the author makes a claim that is unsubstantiated. The author fails to provide necessary information that support his claim. Also, the author makes certain assumptions in his logic that are questionable. In order to makes author's claim more logically sound, more information is required, and those pieces of information have already been discussed in the paragraphs above.
---------------------------------------------------------------------------------------
I know i could have been a bit stronger in the conclusion. Suggestions are welcome. Length - 429 words
“We are very pleased to announce the relocation of our inventory, which had been located in four different warehouses throughout the country, to a single new warehouse near Company headquarters in Boston. This consolidated location will cut the company’s expenses for warehouse rent in half. As a result we expect our monthly profitability to go up by this amount.”
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
Your Response:
In the argument presented above, the author points out that the consolidation of the company's inventory will cut company's warehouse expenses in half and also increase the monthly profitability. Though in the first glance, the argument does seem air tight, but upon closer inspection, the author seems to have failed to address certain key questions that could make or break the argument. In reaching the final conclusion, the author also makes certain far fetched assumptions which might need reconsideration.
First of all, the author says that consolidating the 4 inventories into 1 would cut company's expenses for warehouse in half. This assumes that the cost of the new and bigger warehouse is half of the total expense of the 4 warehouses. Nothing in the argument suggests that this will be the case. It may be that the cost of the newer and bigger warehouse might be equal or greater than half of the total cost of the existing 4 warehouses,, in which case, the author's argument breaks down. The old warehouses could be in an area where the cost of land is low as compared to the land where the consolidated warehouse is. Or it can be the other way round. In any case, we cannot be certain, that this move will cut the company's expense for warehouse in half.
Secondly, the author claims that as a result of this consolidation, the monthly profitability would go up. The argument does have some basis to support this claim, but that too is a bit far fetched. Since, profit equals costs minus the revenue, we cannot comment on the profit unless we have information on both costs and revenue. The movement of inventory from 4 locations to 1 would certainly involve additional costs, so this casts serious doubts on the claim that profitability would certainly increase. Additionally, even if we assume that all the inventory from the 4 locations is retained, there is no evidence in the argument that supports the claim for increased revenues. Even if costs were reduced and the revenue were increased, we do not have any idea about their relative amounts, hence, we cannot definitely conclude that profitability would increase as a result of the consolidation of the inventory.
Overall the author makes a claim that is unsubstantiated. The author fails to provide necessary information that support his claim. Also, the author makes certain assumptions in his logic that are questionable. In order to makes author's claim more logically sound, more information is required, and those pieces of information have already been discussed in the paragraphs above.
---------------------------------------------------------------------------------------
I know i could have been a bit stronger in the conclusion. Suggestions are welcome. Length - 429 words
Moderators:
188 posts
