In order for next year to be a profitable one for Lance Automotives

Question

In order for next year to be a profitable one for Lance Automotives, the car manufacturer must increase its sales in Japan. Six new car dealerships that only sell Lance vehicles will open in Japan by March of next year, but a number of industry observers have stated that Lance will still not make a profit next year.

Which of the following, if true, most helps to explain the statements of the industry observers?

(A) Lance faced unusually stiff government regulations in securing the right to open the new dealerships in Japan.
(B) In another two to three years, several other automakers will be opening new dealerships close to the ones that Lance will open next year in Japan.
(C) Four of the new dealerships that Lance will open in Japan are located in cities in which tourism is the biggest industry.
(D) Lance has a new chief executive with no experience selling goods in the Japanese market.
(E) Sales projections for Lance vehicles outside of Japan are expected to drop substantially next year.

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Question 26: Lance Automotives

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winterschool · Answer

In order for next year to be a profitable one for Lance Automotives, the car manufacturer must increase its sales in Japan. Six new car dealerships that only sell Lance vehicles will open in Japan by March of next year, but a number of industry observers have stated that Lance will still not make a profit next year.

Which of the following, if true, most helps to explain the statements of the industry observers?

(A) Lance faced unusually stiff government regulations in securing the right to open the new dealerships in Japan.  Incorrect

though stiff government regulations, it can open ne dealership

(B) In another two to three years, several other automakers will be opening new dealerships close to the ones that Lance will open next year in Japan.  Incorrect

concern for next year, not after two to three years

(C) Four of the new dealerships that Lance will open in Japan are located in cities in which tourism is the biggest industry.  Incorrect

it weakens conclusion, tourism industry can increase sales

(D) Lance has a new chief executive with no experience selling goods in the Japanese market.  Incorrect

experience of chief executive is irrelevant

(E) Sales projections for Lance vehicles outside of Japan are expected to drop substantially next year.  Correct

other market sales decrease substantially, so cant profit next year

EMPOWERgmatVerbal · Answer

Official Explanation:

In order for next year to be a profitable one for Lance Automotives, the car manufacturer must increase its sales in Japan. Six new car dealerships that only sell Lance vehicles will open in Japan by March of next year, but a number of industry observers have stated that Lance will still not make a profit next year.

Which of the following, if true, most helps to explain the statements of the industry observers? 
 
 (A) Lance faced unusually stiff government regulations in securing the right to open the new dealerships in Japan. 
 (B) In another two to three years, several other automakers will be opening new dealerships close to the ones that Lance will open next year in Japan. 
 (C) Four of the new dealerships that Lance will open in Japan are located in cities in which tourism is the biggest industry. 
 (D) Lance has a new chief executive with no experience selling goods in the Japanese market. 
 (E) Sales projections for Lance vehicles outside of Japan are expected to drop substantially next year.

Question Type:   Strengthen
  Boil It Down:   To make a profit = Lance Automotives must increase sales in Japan. So they will open 6 new dealerships in Japan. Industry observers say they still won’t make a profit if they do this.
  Goal:    Find the best reason why industry observers are correct.

Analysis:  
The question asks for information that would strengthen the assertion that Lance will not have a profitable year despite opening the new Japanese dealerships.
 
 Conclusion:  Lance will not make a profit next year.
 
 Evidence:  None is provided.

(A) Lance faced unusually stiff government regulations in securing the right to open the new dealerships in Japan.
  This only provides background information; it does not deal with future profitability. Remember to be on the lookout for past information which has no bearing on a future outcome.

(B) In another two to three years, several other automakers will be opening new dealerships close to the ones that Lance will open next year in Japan.
  Since these other dealerships won’t open for at least two years, this has no known effect on next year’s sales for Lance.

(C) Four of the new dealerships that Lance will open in Japan are located in cities in which tourism is the biggest industry.
  Tourism’s effect on car sales is not evident. This is clearly out of the scope of the argument.

(D) Lance has a new chief executive with no experience selling goods in the Japanese market.
  Simply because the new chief executive has no experience in the Japanese market does not lead to the conclusion that things will go poorly at the new dealerships. One cannot make assumptions about the effect the executive’s lack of experience will have.

(E) Sales projections for Lance vehicles outside of Japan are expected to drop substantially next year.
 This is the correct choice. This directly suggests that Lance could well have problems making a profit. The conclusion, remember, was about the company as a whole, even if the information provided had to do with Japan in particular.

Don’t study for the GMAT. Train for it.

Gylmitul · Answer

I think the question construct is a little weak.

In the question, increasing sales at japan is presented to be critical to increasing profits. Then later in the stimulus we are presented that despite opening new dealerships in japan, the profit will not increase.

A major assumption here is that opening dealerships = increase in sales which should have been among the answer choices.

As we do not know whether the initial estimate for the required increase in sales in Japan was based after considering the substantial decline in sales in other geographies or not.

Increase in distribution is not equal to increase in sales would have been a better assumption.

quote="EMPOWERgmatVerbal"] Official Explanation: