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# GMAT Question Feedback from ETS

Author Message
Joined: 31 Dec 1969
Location: Russian Federation
GMAT 3: 740 Q40 V50
GMAT 4: 700 Q48 V38
GMAT 5: 710 Q45 V41
GMAT 6: 680 Q47 V36
GMAT 9: 740 Q49 V42
GMAT 11: 500 Q47 V33
GMAT 14: 760 Q49 V44
WE: Supply Chain Management (Energy and Utilities)
GMAT Question Feedback from ETS [#permalink]

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21 May 2003, 13:26
The question was about a method for evaluating a new cost-cutting
manufacturing process in which companies project the results of adopting or
not adopting the new process against a fixed background of costs, selling
prices, and market share. The question asked test-takers to find a drawback
to this method of evaluation.

You expressed a concern about the explanation given for choice B. The fact
that the evaluation of the method is conducted against a fixed background
does not mean that the background cannot include complex variations in such
things as interest rates. That is, if someone predicts that interest rates
are going to fall, for example, then the benefit of adopting the method can
be evaluated against that prediction, and if necessary the planned adoption
date can be altered.

The case for choice D is different. What D points out is that the outcome
of the evaluation process can affect the factors that are in the fixed
background; investing in the new process can lead to lower prices and higher
market share, upsetting the very analysis used to justify that investment.
You question our claim that the method overvalues the noninvestment option;
whether it does so depends on whether you take the perspective of a company
that is deciding whether to adopt or that of a competitor that has decided
in favor of adopting, but from either perspective there is a systematic
misestimation.
This is about my tough CR.
Cheers!
Victor
Founder
Joined: 04 Dec 2002
Posts: 15153
Location: United States (WA)
GMAT 1: 750 Q49 V42
Re: GMAT Question Feedback from ETS [#permalink]

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21 May 2003, 13:28
VTay25 wrote:
The question was about a method for evaluating a new cost-cutting
manufacturing process in which companies project the results of adopting or
not adopting the new process against a fixed background of costs, selling
prices, and market share. The question asked test-takers to find a drawback
to this method of evaluation.

You expressed a concern about the explanation given for choice B. The fact
that the evaluation of the method is conducted against a fixed background
does not mean that the background cannot include complex variations in such
things as interest rates. That is, if someone predicts that interest rates
are going to fall, for example, then the benefit of adopting the method can
be evaluated against that prediction, and if necessary the planned adoption
date can be altered.

The case for choice D is different. What D points out is that the outcome
of the evaluation process can affect the factors that are in the fixed
background; investing in the new process can lead to lower prices and higher
market share, upsetting the very analysis used to justify that investment.
You question our claim that the method overvalues the noninvestment option;
whether it does so depends on whether you take the perspective of a company
that is deciding whether to adopt or that of a competitor that has decided
in favor of adopting, but from either perspective there is a systematic
misestimation.
This is about my tough CR.
Cheers!
Victor

Really?

--
Re: GMAT Question Feedback from ETS   [#permalink] 21 May 2003, 13:28
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