Namangupta1997 wrote:
Hi
AndrewN If the cost of oil increases, it will increase both for maintaining the old burner and the new burner. It is the quantity of oil that will be considerably less for the new burner. So the effective difference between these two expenses i.e "new cost x (old quantity - new quantity of oil)" should still remain the same. What am I missing in option E ?
There is no where mentioned in the question that existing plant uses more than 1 burner. In fact it says "cost savings between the total amount the asphalt plant actually paid for oil using
its former burner " and I believe that should be sufficient to assume that there is no other burner. So if we go by option B, the use of 2 new burners would in turn reduce the amount of payment received as it would be calculated based on the oil used by just 1 old burner. What is wrong with option B ?
Hello,
Namangupta1997. Thank you for being patient while I have been on vacation. I think what you are missing in answer choice (E) is that the price of oil is said to steadily increase only
after the new burner is installed, and
soon after at that. This change in oil pricing at the exact time of the switchover to the new oil burner would only hurt the chances that the plan would be successful—i.e. lucrative—for Hotco.
You raise an interesting point about the language used in the passage and in answer choice (B):
will sell one and the subsequent reference to
the Hotco burner from the passage can only reasonably be interpreted as a single burner, but then we see this new consideration involving multiple burners in the answer choices. I can see a few directions the discussion could take, but I have trouble justifying how Hotco would lose out by selling Clifton Asphalt multiple burners. Consider the following scenarios:
1) Only the first burner, the one mentioned in the opening line, is sold under the conditions provided in the passage:
will sell one for no payment other than... Hotco could then sell an extra burner that was not subject to the conditions. This extra burner would have nothing to do with the plan itself.
2) Like
the Tesla Solar Roof and its Powerwall integrated battery system, the Hotco oil burner might be efficient but have only so much capacity before a second unit would need to be purchased. Not only can we
not assume that the second unit would be subject to the same terms of sale as the first, we also cannot assume that two more efficient units would require more oil to the point that
even if the second burner was subject to the same terms of sale as the first, Hotco would lose out. Consider this: if the old burner had a capacity of, say, 5000 gallons, and used all that oil, and the new ones each have a capacity of 2000 gallons (since they are more efficient), the net reduction of 1000 gallons would still be substantial. (It does not take a
Bunuel to appreciate the 20 percent decrease.) Depending on the
price of oil—note the language in
paid for oil versus
will pay for oil that lies at the heart of the plan—this could still be a winning proposition for Hotco. There is, at least, no way to lean on anything but an assumption that Hotco could be making a bad deal in seeing through its plan.
Answer choice (B) ultimately does not hold up to scrutiny, so we have to abandon it. Perhaps the question makes more sense now. Thank you for thinking to ask, and again, thank you for your patience while awaiting my response.
- Andrew