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# Last year Company X experienced an unexpectedly steep drop in profits.

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CEO
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Last year Company X experienced an unexpectedly steep drop in profits.  [#permalink]

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Updated on: 26 Sep 2018, 03:32
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Difficulty:

55% (hard)

Question Stats:

55% (01:20) correct 45% (01:35) wrong based on 324 sessions

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Last year Company X experienced an unexpectedly steep drop in profits. To offset this loss, Company X should reduce its workforce by 10%. Doing so will allow the company to save a great deal in payroll expenditures. Company X will therefore be able to recoup its losses.

The argument above assumes that

A. The amount saved in payroll expenditures will exceed the amount lost in profits.

B. The amount saved in payroll expenditures will equal the amount lost in profits.

C. Reducing Company X's workforce will not cause the company to reduce productivity.

D. Company X has no reserve funds to offset its losses.

E. Company X has not at sometime in the past reduced its workforce.

Originally posted by Praetorian on 31 Dec 2003, 14:34.
Last edited by Bunuel on 26 Sep 2018, 03:32, edited 1 time in total.
Renamed the topic, edited the question and added the OA.
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Re: Last year company X experienced an unexpected steep drops in  [#permalink]

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26 Sep 2018, 03:25
5
Official explanation given by Kaplan -

Conclusion: Company X should reduce its workforce by 10% in order to recoup losses.

Evidence: Company X would save money in payroll expenditures if the workforce were smaller.

The objective of company X is to generate enough revenue to offset past losses, and the evidence states that this can be done by cutting the workforce (since cutting the workforce also means lower payroll expenditures). For this to be true, a smaller workforce must be compatible with revenue generation. If it is not, then company X will not generate revenue and will not recoup past losses. The answer must indicate that these two concepts are compatible. Choice (C) does so by stating that reducing the workforce will not result in a decrease in productivity.

(A) and (B) focus on decreased payroll expenditures rather than on a decreased workforce, and thereby ignore the issue of productivity. It is possible that company X will recoup its losses by a decrease in payroll costs, but then lose even more money due to decreased production. Assuming either (A) or (B) does not guarantee that the company will win in the end. With (D), the argument does not address any other pools of money for possible use; it simply asks about the connection between a smaller workforce and the possibility of recouping losses. And (E), past workforce reductions are not relevant here. We are only concerned with the current pool of employees.
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09 Jul 2007, 06:40
I think it's C.
Company is assuming that cut in resources will not hamper the productivity and hence it will make same profit but with less expenditure.

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Brajesh
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Re: Last year company X experienced an unexpected steep drops in  [#permalink]

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29 Jul 2014, 02:57
2
vineetgupta wrote:
Last year company X experienced an unexpected steep drops in profits.To offset this loss,company X should reduce its workforce by 10%.Doing so will allow the company to save a great deal in payroll expenditures.Company X will therefore be able to recoup the losses.

The argument above assumes that
A. The amount saved in payroll expenditures will exceed the amount lost in profits.
B. The amount saved in payroll expenditures will equal the amount lost in profits.
C. Reducing Company X's workforce will not cause the company to reduce productivity.
D. Company X has no reserve funds to offset its losses.
E. Company X has not at sometime in the past reduced its workforce.

Please give reasons for ur choices...
There are 2 inherent assumptions to Policy Proposal or GOAL/Target(FORMAT: To achieve goal, this policy shall be adhered) questions: 1) Implementation of Policy will achieve the goal. Link 2) Implementation of Policy will not impact other aspects of Goal.

It is the second of the inherent assumptions that gets reflected in Choice C.

To add to this, I feel that loss in stimulus talks about only one year of loss, whereas the conclusion(Last line: "Company X will therefore be able to recoup the losses.") and target is to recoup ie recover for losses of multiple years, and not a single year. A and B will attempt to recoup company only for this year's loss, but will not help in recouping from upcoming losses, if the employees are lost.
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Last year Company X experienced an unexpectedly steep drop in profits.  [#permalink]

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26 Sep 2018, 03:45
Hi ,
I thought conclusion is "Company X will therefore be able to recoup the losses. " and then chose A option
Sometimes i am not able to figure out the conclusion.
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Re: Last year Company X experienced an unexpectedly steep drop in profits.  [#permalink]

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26 Sep 2018, 07:38
Praetorian wrote:
Last year Company X experienced an unexpectedly steep drop in profits. To offset this loss, Company X should reduce its workforce by 10%. Doing so will allow the company to save a great deal in payroll expenditures. Company X will therefore be able to recoup its losses.

The argument above assumes that

A. The amount saved in payroll expenditures will exceed the amount lost in profits.

B. The amount saved in payroll expenditures will equal the amount lost in profits.

C. Reducing Company X's workforce will not cause the company to reduce productivity.

D. Company X has no reserve funds to offset its losses.

E. Company X has not at sometime in the past reduced its workforce.

Imo C.

This is a very easy question if we see this question from real world scenario but things get muddy when the scope is only the argument. This case demands us to use real world knowledge of market and productivity. A good question to practice since it does not directly affects the conclusion.
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Re: Last year Company X experienced an unexpectedly steep drop in profits.  [#permalink]

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27 Sep 2018, 04:43
1
If we negate option B-
The amount saved in payroll expenditures will NOT BE equal the amount lost in profits then wouldn't it break the argument? Shouldn't B correct answer?
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Re: Last year Company X experienced an unexpectedly steep drop in profits.  [#permalink]

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27 Sep 2018, 10:51
shreyasawhney wrote:
If we negate option B-
The amount saved in payroll expenditures will NOT BE equal the amount lost in profits then wouldn't it break the argument? Shouldn't B correct answer?

Even I have the same question. mikemcgarry , abhimahna , VeritasKarishma . Can anybody pls enlighten?
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Last year Company X experienced an unexpectedly steep drop in profits.  [#permalink]

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28 Sep 2018, 15:08
shreyasawhney wrote:
If we negate option B-
The amount saved in payroll expenditures will NOT BE equal the amount lost in profits then wouldn't it break the argument? Shouldn't B correct answer?

Here is my attempt, I hope it helps.

I also faced a similar thing at the beginning but then this is what I finally understood.

When we negate option B does it break down the conclusion?

Is it necessary for the conclusion to hold true?

Negating option B, it will not equal the amount lost in profits. Well what if it doesn’t? Maybe the amount saved in payroll expenditures saves more than what is lost? Maybe the amount saved does not cover what is lost? Can we say for sure it will recoup the losses?

When we negate option C, it will reduce productivity and if it does then how can we recoup the losses? We are already losing more.

Posted from my mobile device
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Re: Last year Company X experienced an unexpectedly steep drop in profits.  [#permalink]

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09 Oct 2018, 20:42
The other reason to eliminate A and B is that A, and B are clearly stated in the argument, so they are not assumption needed. Remember that assumption is the infor not stated in the argument but is needed for the author to draw the conclusion
Re: Last year Company X experienced an unexpectedly steep drop in profits.   [#permalink] 09 Oct 2018, 20:42
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