Lower material costs can lead to increased profitability. Princeton RC

Question

﻿Lower material costs can lead to increased profitability. This potential, however, does not guarantee that lowered costs will actually improve the bottom line. The emphasis on securing low cost materials must be measured against other company priorities, such as customer satisfaction and long-term profitability. In cases where a company’s material costs are already in line with those of its competitors, lowering material costs can lead to unforeseen problems in the long run. Low cost materials may translate into problems further down the supply chain, particularly at the point where the end consumer interacts with the product.

A local bicycle manufacturer failed to see these long-term implications of seeking lower costs. As a result, it experienced a decrease in customer satisfaction and a long-term decline in orders. The executives of the bicycle factory didn’t realize the degree to which low-cost gear components were less user-friendly than the components they had previously been using. Furthermore, the company didn’t analyze the degree to which those low-cost bicycle components would increase product returns and cost the company its hard-earned market share. Ultimately, the only benefit of their new sourcing strategy was that it increased short-term profitability.    1

1. The primary purpose of the passage is to

A. contrast two potential outcomes of a type of business strategy
B. demonstrate that higher costs are always better than lower costs
C. recommend a deeper analysis of a type of business investment 
D. explain how to manage costs further down the supply chain
E. criticize executives who fail to see long-term opportunities

2   
2. According to the passage, an emphasis on low material costs is comparable to an emphasis on product returns in terms of the

A. direct relationship between the two 
B. superior importance of low material costs
C. long-term planning that can cause problems further down the supply chain 
D. market share they are likely to command
E. long-term analysis they both require

3   
3. The passage suggests which of the following about the product quality provided by the local bicycle manufacturer prior to changing its material costs?

A. It was at least on par with that of its competitors
B.Its materials were the only reason for its strong market share.
C. Its materials were of lower quality than those of its competitors.
D.The industry was making a shift toward lower cost materials.
E. It needed to be improved because its competitors were gaining market share.

Nirman23 · Answer

Can anyone help me with this question ? Q1, Q2, Q3 its all quite confusing. Please anyone can explain it.

Thank you in advance

MatteFracca · Answer

Q3 doesn't have an explanation - I guess that there's been some mistaking

Sanskar115 · Answer

During a Princeton practice mock, I encountered a question that led to three incorrect answers, resulting in a verbal score of 77. I have attached the explanations provided but I would appreciate further clarification from experts in simpler terms.
@ MartyMurray  @ GMATNinja  @ CrackverbalGMAT

Question 1: 
This is a primary purpose question, as indicated by the phrase  primary purpose.  The task of the question is to determine why the author wrote the passage. The subject of the question is  the passage  as a whole. In order to answer the question, determine why the author wrote the passage, then evaluate the answer choices, eliminating any choice that does not match the author’s primary purpose. According to the passage,  the emphasis on securing low cost materials must be measured against other company priorities, such as customer satisfaction and long-term profitability.  The author cites the example of  a local bicycle manufacturer , who  didn’t analyze the degree to which those low-cost bicycle components would increase product returns and cost the company its hard-earned market share.  Thus, the author wrote the passage in order to recommend a course of action involving a more thorough analysis before relying on  lower material costs.  
 Choice A: No. This answer may seem appealing because the passage mentions that  lower material costs can lead to increased profitability.  However, this answer choice is a memory trap. The primary purpose of the passage is to discuss how  lowering material costs can lead to unforeseen problems in the long run . 
 Choice B: No. This answer may seem tempting because the passage states that  lowering material costs can lead to unforeseen problems in the long run,  and  low cost materials may translate into problems further down the supply chain . However, the phrase  always better  is extreme language. The passage states  lower material costs can lead to increased profitability.  
  Choice C: Correct. The passage states that  the emphasis on securing low cost materials must be measured against other company priorities, such as customer satisfaction and long-term profitability.  The author cites the example of  a local bicycle manufacturer , who  didn’t analyze the degree to which those low-cost bicycle components would increase product returns and cost the company its hard-earned market share.  Thus, the author recommends  a deeper analysis.   
 Choice D: No. This answer may seem appealing due to the recycled language  further down the supply chain . However, this is a memory trap. The passage states that  low cost materials may translate into problems further down the supply chain, particularly at the point where the end consumer interacts with the product.  Supply chain management is not the  primary  purpose of the passage. 
 Choice E: No. This answer may seem tempting because the passage states that  a local bicycle manufacturer failed to see these long-term implications of seeking lower costs.  However, this answer is a memory trap. The passage states that  the only benefit of their new sourcing strategy was that it increased short-term profitability.  The author warns about  long-term implications  not about neglecting  long-term opportunities.  
 The correct answer is choice C.

Sanskar115 · Answer

Question 2: 
 The phrase  according to the passage  indicates that this is a retrieval question. The task of the question is indicated by the phrase  according to the passage...is comparable to... in terms of the.... The subject of the question is  an emphasis on low material costs  as comparable to  an emphasis on product returns . In order to answer the question, determine what the passage states about the subject and evaluate the answer choices, eliminating any choice that cannot be supported by the text. According to the passage,  lowering material costs can lead to unforeseen problems in the long run.  Discussing a local manufacturer, the passage states that  the company didn’t analyze the degree to which those low-cost bicycle components would increase product returns and cost the company its hard-earned market share.  Therefore, emphasizing  low material costs  is directly related to emphasizing increased  product returns.  
  Choice A: Correct. The passage states that  lowering material costs can lead to unforeseen problems in the long run.  Discussing a local manufacturer, the passage states that  the company didn’t analyze the degree to which those low-cost bicycle components would increase product returns and cost the company its hard-earned market share.  Therefore, there is a direct relationship between  low material costs  and increased  product returns.   
 Choice B: No. This answer choice may seem appealing because the passage states  lowering material costs can lead to unforeseen problems in the long run , and one unforeseen problem is  product returns . However,  superior importance  is extreme language. Although, there is a direct relationship between  low material costs  and increased  product returns , there is no such comparison of the  superior importance  of low material costs.  
 Choice C: No. This answer choice may seem tempting because the passage states that  lowering material costs can lead to unforeseen problems in the long run.  However, this answer choice is a memory trap. The  product returns  were mentioned with respect to a bicycle manufacturer who  failed to see these long-term implications of seeking lower costs . It was not in respect to  long-term planning  as the answer choice suggests. 
 Choice D: No. The recycled language  market share  may make this choice seem appealing. However, this answer is a reversal. The passage states that  the company didn’t analyze the degree to which those low-cost bicycle components would increase product returns and cost the company its hard-earned market share.  While the author correlates  low material costs  with  market share , the same cannot be said for  product returns . 
 Choice E: No. This answer may seem tempting because the passage states that  the company didn’t analyze the degree to which those low-cost bicycle components would increase product returns...  However, the word  both  is extreme language that makes a claim stronger than that in the passage. The passage states that  lowering material costs can lead to unforeseen problems in the long run  and  a local bicycle manufacturer failed to see these long-term implications of seeking lower costs . Therefore, the passage suggests a need for  long-term analysis  but only as it relates to an emphasis on low material costs which can result in increased product returns. There is no indication that that product returns on its own requires  long-term analysis . 
 The correct answer is choice A.

Sanskar115 · Answer

Nirman23   peakyrex   MatteFracca

The phrase  the passage suggests  in the question stem indicates that this is an inference question. The task of the question is indicated by the word  suggests . The subject of the question is  the product quality provided by the local bicycle manufacturer prior to changing its material costs . In order to answer the question, determine what the passage states about the subject and evaluate the answer choices, eliminating any choice which cannot be supported by the text. The passage states that  in cases where a company’s material costs are already in line with those of its competitors, lowering material costs can lead to unforeseen problems in the long run...may translate into problems further down the supply chain...a   local bicycle manufacturer failed to see these long-term implications of seeking lower costs. As a result, it experienced a decrease in customer satisfaction and a long-term decline in orders ... and cost the company its hard-earned market share . The phrase  hard-earned market share  indicates that the company once had an advantage in market share and now has lost that advantage. The only strategic change discussed in the passage is that of the company lowering its material costs, so it may be inferred that its previously greater market share may have been acquired in part due to the quality of its products. The correct answer will likely paraphrase this idea. 
  Choice A: Correct. This choice is supported by the passage. The second paragraph states  that a local bicycle manufacturer  switched to  low-cost bicycle components , which ultimately  cost the company its hard-earned market share . Thus, the passage indicates that the bicycle manufacturing company’s market share declined along with its product quality. Thus while never stated directly, this is the most reasonable inference from the passage.  
 Choice B: No. The word  only  is an example of extreme language. The passage indicates that its market share was  hard-earned , but does not provide any information to support the idea that product quality was the  only reason  for its market share. 
 Choice C: No. This is a reversal. The passage states that the bicycle company’s decision to switch to low-cost bicycle components... cost the company its hard-earned market share , which suggests that the company’s quality was at least as good as its competitors. 
 Choice D: No. This answer choice relies upon outside knowledge to be appealing. Anyone with outside knowledge of manufacturing processes and outsourcing might be tempted by this choice. However, the passage only mentions this particular manufacturer, not the  industry  as a whole. 
 Choice E: No. The phrase  gaining market share  is a memory trap for  hard-earned market share  which might make this choice seem appealing. However, this choice is a reversal. The passage indicates that the company’s decision to use  low cost materials...cost the company its hard-earned market share . The loss of market share came after the switch in materials, not before. 
 The correct answer is choice A.

QueenFreak · Answer

Its wrong, apparently the correct answer is C not A.

bb · Answer

Princeton has always had funky questions unfortunately in Verbal and even in Quant.

I don't think I agree with the second question being A.

Should be: 
1. C 
2. C and A could be correct and disputed. 
3. A.

dhruva09 · Answer

bb  For Q2, how did you eliminate option E ?

HNS · Answer

Hi  Sanskar115 ,

The problem with option C is its second half. I fully agree with the first half about recommending a deeper analysis but how is lowering material costs related to a business investment ? Investment is something where some capital is used to start something new or something in similar lines. Lowering costs is more of a business strategy.

Can you please help me with the above doubt.

Lower material costs can lead to increased profitability. Princeton RC

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Lower material costs can lead to increased profitability. Princeton RC

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