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# Hotco oil burners, designed to be used in asphalt plants,

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Intern
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Joined: 16 Jul 2013
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GMAT Date: 10-15-2013
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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04 Nov 2013, 23:42
Ivan91 wrote:
How the hell to answer this when I have no idea what oil burner is and what the whole passage talks about...

you do not really need to know every single term that appear in the argument. All you need to correctly solve 90 percent of CR question is the conclusion.

in this question, the whole argument talks about cost saving, so in order to weaken the argument, the answer choice must attack the argument in that area. and answer choice E is the only one that does that.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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02 Jun 2014, 15:39
Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?
Summary: Hotco pricing plan is Price of oil * oil used (In older plants) - Price of oil * oil used (in Hotco's plants)

A) Another manufacturer’s introduction to the market of a similarly efficient burner
Effect on Hotco business = yes
Effect on Hotco plans to profit from its efficient plants = No

B) The Clifton Asphalt plant’s need for more than one new burner
If the extra burner replaces another old plant = more money for Hotco
If the extra burner replaces no another plant = more money for Hotco

C) Very poor efficiency in the Clifton Asphalt plant’s old burner
As per summary equation above, this makes more money for Hotco (Greater previous cost)

D) A decrease in the demand for asphalt
As per summary equation above, this makes more money for Hotco (Lower current cost)

E) A steady increase in the price of oil beginning soon after the new burner is installed
As per summary equation above, this could make the equation become negative, i.e. Hotco lose money in this pricing plan. This is the only answer that shows disadvantage of the plan. Answer is therefore (E)
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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24 Sep 2014, 09:12
E is clear winner indeed. It weakens the argument
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Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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20 Feb 2015, 06:56
1
KUDOS
Got traped by D, as I've only 40 sec... One should not rush such questions. It's actually not a very difficult one.
So, Hotco are more efficient than standard Burners. But the clue is here that Hotco and Standard Burner BOTH use Oil.
I've rushed this one and thought that Hotco uses alternative fuel....

A) Another manufacturer’s introduction to the market of a similarly efficient burner - irrelevant
B) The Clifton Asphalt plant’s need for more than one new burner - strengthens...
C) Very poor efficiency in the Clifton Asphalt plant’s old burner - strengthens....

So, the last two are interesting:

D) A decrease in the demand for asphalt - [I've found a very good explanation wha not (D) from EGMAT] So, if the demand for asphalt decreases, the amount of oil used by Clifton to manufacture asphalt would likely decrease. If the amount of oil decreases, Clifton’s cost savings on oil would be more than they had been for the previous two years. In this case, it would be an advantage for Hotco, not a disadvantage.
E) A steady increase in the price of oil beginning soon after the new burner is installed -> CORRECT. this one has been explained by others, so I would not restate them
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Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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19 Nov 2015, 21:58
Maybe I'm reading into this too much, but the question states that there "will be [an adjustment] after two years to equal the actual cost savings." The only thing that will fluctuate is the price of oil.

Now if oil increases, that's to Hotco's advantage -- given that they retain savings (a proportion), they're payment should increase because the cost of the input increases.

E would be the obvious answer without the adjusted payment bit added in so I'm a bit confused.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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06 Jan 2016, 12:31
1
KUDOS
Wanted to explain choice D for those not familiar. General business equation = Revenue - Costs = Profits.

The premise states that the overall amount to be paid is the difference in costs, that is, difference between costs prior to the installation and costs after the installation.

An increase in demand for asphalt will increase revenue and has nothing to do with costs.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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04 Apr 2016, 13:55
1
KUDOS
run4run wrote:
Hotco oil burners, designed to be used in asphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actually paid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.

Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?

A) Another manufacturer’s introduction to the market of a similarly efficient burner
B) The Clifton Asphalt plant’s need for more than one new burner
C) Very poor efficiency in the Clifton Asphalt plant’s old burner
D) A decrease in the demand for asphalt
E) A steady increase in the price of oil beginning soon after the new burner is installed

For some reason I can't understand this. Any help will be most appreciated.

The gap of saving will decrease if the price of oil increases. For example, let suppose the initial cost of oil expenditure was $100 and because of great efficiency of the new burner the cost has reduced to$70, so the saving would be $30. But what if the crude oil price rises to twice? then there will be no saving. hope you liked the clarification. #Kudos _________________ If you can't give up, you can't lose. Director Joined: 04 Jun 2016 Posts: 640 GMAT 1: 750 Q49 V43 Hotco oil burners, designed to be used in asphalt plants, [#permalink] ### Show Tags 15 Jul 2016, 05:15 A clear winner by miles is Option E Argument say Clifton Ashphalt currently uses old burner; Old burner uses 100 gallons of oil. One gallon of oil is 1$ . So Clifton Asphalt currently spends 100$for oil. Hotco will install its Burner:- Hotco burner uses only 20 gallons of oil. If the price of oil stays same 1$ per gallon, then IDEALLY Clifton Asphalt will spend only 20$on oil and the difference of 100$-20$=80$ will come to Hotco Burner as per the contract.

But IF after installing HOTCO Burner, the price of oil increases to 6$a gallon then Clifton Asphalt will spend 6$*20 (Hotco burner oil consumption)=120\$
Now the difference is old -new = 100-120 =-20

SO now rather then getting money from Clifton Asphalt , Hotco Burners will have to pay money to Clifton Asphalt.. Because the contract says so.
THEREFORE RISING OIL PRICES ARE DANGEROUS & VERY DISADVANTAGEOUS FOR HOTCO BURNERS.

And what option tells us that :-

OPTION E) A steady increase in the price of oil beginning soon after the new burner is installed

run4run wrote:
Hotco oil burners, designed to be used in asphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actually paid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.

Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?

A) Another manufacturer’s introduction to the market of a similarly efficient burner
B) The Clifton Asphalt plant’s need for more than one new burner
C) Very poor efficiency in the Clifton Asphalt plant’s old burner
D) A decrease in the demand for asphalt
E) A steady increase in the price of oil beginning soon after the new burner is installed

For some reason I can't understand this. Any help will be most appreciated.

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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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01 Aug 2016, 09:07
run4run wrote:
Hotco oil burners, designed to be used in asphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actually paid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.

Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?

A) Another manufacturer’s introduction to the market of a similarly efficient burner
B) The Clifton Asphalt plant’s need for more than one new burner
C) Very poor efficiency in the Clifton Asphalt plant’s old burner
D) A decrease in the demand for asphalt
E) A steady increase in the price of oil beginning soon after the new burner is installed

My analysis:

(Premise 1)Hotco sells its oil burner to Clifton for the following payment: (cost of using current oil burner in last 2 years) - (cost of using Hotco oil burner in the following 2 years)
(Premise 2) Calculation of the payment will me made on installation and this will be adjusted in 2 years.

(Pre thinking) In order to weaken the argument we need to think that in the next 2 years the cost of using the Hotco oil burner will be more expensive than using the former oil burner during the last 2 years.
- A possible weakener could be that in the last 2 years Clifton had less costs because it produced less asphalt.
- Another possible weakener could be that Hotco oil burner is not that efficient and Clifton ends up having more costs than before.

(Analysis of the answers)

A) Another manufacturer’s introduction to the market of a similarly efficient burner
It doesn't matter if there is another player in the market of efficient burners because Hotco already made the deal with Clifton.
B) The Clifton Asphalt plant’s need for more than one new burner
This is out of scope because is not talking about the impact in costs, which is the reasoning we are trying to weak.
C) Very poor efficiency in the Clifton Asphalt plant’s old burner
This is fact strengthens the argument because says that the former burner was not efficient (more costs).
D) A decrease in the demand for asphalt
A decrease in the demand for asphalt would imply lower prices of oils and this would strengthen the argument because a lower price of the input would mean lower costs.
E) A steady increase in the price of oil beginning soon after the new burner is installed
This is the correct answer because an increase in the price of oil will impact in higher costs for the Hotco oil burner for the following 2 years.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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02 Aug 2016, 06:12
run4run wrote:
Hotco oil burners, designed to be used in asphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actually paid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.

Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?

A) Another manufacturer’s introduction to the market of a similarly efficient burner
B) The Clifton Asphalt plant’s need for more than one new burner
C) Very poor efficiency in the Clifton Asphalt plant’s old burner
D) A decrease in the demand for asphalt
E) A steady increase in the price of oil beginning soon after the new burner is installed

For some reason I can't understand this. Any help will be most appreciated.

The correct answer is E.
As per the given description, the Asphalt will pay to Hotco industries the cost saving that the plant will have for the quantity of oil it will for new Hotco burnes and the quantity of oil had used for old burner in the last two years. Now if the price of oil would steadily increase it the cost saving between the two burner will decerease and hence hotco's plan will fail.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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08 Dec 2016, 04:03
Let:
$$X$$: Total amount the plant paid for oil using the older (former) burner for last two years (known).

$$Y$$: Total amount the plant will pay for oil using HOTCO burner for next two years (estimated).

HOTCO estimated S.P. = $$X$$ – Estimated($$Y$$)

As oil price will increase the value of actual Y will also increase, so that will be a loss for HOTCO.

Please note that Option (c) Very poor efficiency in the Clifton Asphalt plant’s old burner; is not going to affect the outcome. We already know the value of $$X$$.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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06 Sep 2017, 15:51
boil down to A and E, but E is winner because the question ahs nothing to do with efficiency, but with the price.
ALso, E includes all important factors from the passage.
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Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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06 Sep 2017, 16:56
is there any way to narrow down the difficulty level of this q? 650+ I'm guessing (in the 670-700 range)

Last edited by LakerFan24 on 06 Sep 2017, 17:09, edited 1 time in total.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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06 Sep 2017, 17:08
i feel so stupid...read the q-stem incorrectly. there's a lot to digest here.

Hotco oil burners, designed to be used in asphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actually paid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.

TRANSLATED: HOTCO'S REVENUE = HOW MUCH CLIFTON PAID FOR OIL USING OLD BURNER (LAST 2 YEARS) - HOW MUCH CLIFTON WILL PAY FOR OIL (NEXT 2 YEARS)
> What would be ADVANTAGEOUS for Hotco? <-- Strengthen: If Clifton paid a LOT more for oil using the old burner AND/OR if Clifton is saving a LOT using the new Hotco oil burner
* ON THE OTHER HAND, WE WANT TO WEAKEN.

Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?

A) Another manufacturer’s introduction to the market of a similarly efficient burner
- out of scope

B) The Clifton Asphalt plant’s need for more than one new burner
- out of scope too

C) Very poor efficiency in the Clifton Asphalt plant’s old burner
- OPPOSITE! Poor efficiency in old burner means higher revenue for Hotco! I initially went for this when I misread the question as "advantage" instead of "disadvantage"

D) A decrease in the demand for asphalt
- out of scope. concerned with pricing of oil, not asphalt

E) A steady increase in the price of oil beginning soon after the new burner is installed
- Although the new burner is more efficient, if the price of oil goes up theoretically, this could diminish the savings. The understood "savings" you get from using Hotco relies on the assumption that you are paying the same (or less) for oil!

Kudos please if you find this helpful
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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07 Sep 2017, 00:21
LakerFan24 wrote:
is there any way to narrow down the difficulty level of this q? 650+ I'm guessing (in the 670-700 range)

well, to narrow the level question, you need to memorize patterns and answers.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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07 Sep 2017, 05:47
chesstitans wrote:
LakerFan24 wrote:
is there any way to narrow down the difficulty level of this q? 650+ I'm guessing (in the 670-700 range)

well, to narrow the level question, you need to memorize patterns and answers.

you misunderstood my question. i was asking if there's a way to identify the level of difficulty of this question irrespective of what the answer is (i showed above that i understand the question). i know its tagged as a 600-700 level q, but i highly doubt anyone scoring at/under 650 would see this.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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07 Sep 2017, 09:42
LakerFan24 wrote:
chesstitans wrote:
LakerFan24 wrote:
is there any way to narrow down the difficulty level of this q? 650+ I'm guessing (in the 670-700 range)

well, to narrow the level question, you need to memorize patterns and answers.

you misunderstood my question. i was asking if there's a way to identify the level of difficulty of this question irrespective of what the answer is (i showed above that i understand the question). i know its tagged as a 600-700 level q, but i highly doubt anyone scoring at/under 650 would see this.

dont pay attention to the level of the question. What you need to know is the pattern, and the right answer.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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19 Nov 2017, 20:42
the concepts of economic issues in this question are really confusing. Nevertheless, the key of this question is all about cost savings => E.
Re: Hotco oil burners, designed to be used in asphalt plants,   [#permalink] 19 Nov 2017, 20:42

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# Hotco oil burners, designed to be used in asphalt plants,

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