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Malco, a prominent electronics manufacturer and distributor, has see

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Malco, a prominent electronics manufacturer and distributor, has see  [#permalink]

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New post Updated on: 24 Sep 2018, 05:22
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A
B
C
D
E

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Malco, a prominent electronics manufacturer and distributor, has seen an after­‐tax revenues grow in proportion to increased expenditures on warehouse security over the last decade. However, because Malco’s losses due to theft at its warehouses remain higher than the industry average, the management decides to continue to increase its spending
on warehouse security in order to ensure that its revenues continue to increase.

Which of the following indicates a logical flaw in Malco’s plan?


A. The decrease in Malco’s losses due to theft over the last decade may be smaller than Malco’s current overall losses due to theft.

B. The industry average for losses due to theft in the electronics distribution field may be low compared to that of other fields.

C. Malco might have been able to achieve an equal increase in revenues over the last decade by increasing its expenditure on international marketing instead of warehouse security.

D. The expenditures on warehouse security to date may have been sufficient to stop the majority of warehouse thefts.

E. Over the last decade, Malco’s spending on warehouse security has increased in proportion to its spending in several other areas, such as advertising and research and development.


Source: Knewton

Hi guys - I am struggling with a CR from Knewton class. Can you please help me understand the OA?

Originally posted by eladshus on 25 Dec 2010, 09:02.
Last edited by Bunuel on 24 Sep 2018, 05:22, edited 3 times in total.
Renamed the topic and edited the question.
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Re: Malco, a prominent electronics manufacturer and distributor, has see  [#permalink]

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New post 25 Dec 2010, 23:56
1
eladshus wrote:
Hi guys - I am struggling with a CR from Knewton class. Can you please help me understand the OA?

Malco, a prominent electronics manufacturer and distributor, has seen an after­‐tax revenues grow in proportion to
increased expenditures on warehouse security over the last decade. However, because Malco’s losses due to theft
at its warehouses remain higher than the industry average, the management decides to continue to increase its spending
on warehouse security in order to ensure that its revenues continue to increase.

Which of the following indicates a logical flaw in Malco’s plan?

1. The decrease in Malco’s losses due to theft over the last decade may be smaller than Malco’s current overall losses due
to theft.
2. The industry average for losses due to theft in the electronics distribution field may be low compared to that of other fields.
3. Malco might have been able to achieve an equal increase in revenues over the last decade by increasing its expenditure on
international marketing instead of warehouse security.
4. The expenditures on warehouse security to date may have been sufficient to stop the majority of warehouse thefts.
5. Over the last decade, Malco’s spending on warehouse security has increased in proportion to its spending in several other
areas, such as advertising and research and development.


The first 3 are irrelevant.

4. Ok but, what if even the minority thefts too are eliminated. Revenue will increase
5. This shows revenue increase could have been due to spending on promotions. So further spending on security might not yield the intended effects.
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Re: Malco, a prominent electronics manufacturer and distributor, has see  [#permalink]

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New post 26 Dec 2010, 13:02
1
eladshus wrote:
Hi guys - I am struggling with a CR from Knewton class. Can you please help me understand the OA?

Malco, a prominent electronics manufacturer and distributor, has seen an after­‐tax revenues grow in proportion to
increased expenditures on warehouse security over the last decade. However, because Malco’s losses due to theft
at its warehouses remain higher than the industry average, the management decides to continue to increase its spending
on warehouse security in order to ensure that its revenues continue to increase.

Which of the following indicates a logical flaw in Malco’s plan?

1. The decrease in Malco’s losses due to theft over the last decade may be smaller than Malco’s current overall losses due
to theft. Irrelevant to the plan, the plan only compares the industry average and Malco's losses , in no where there is comparison to his past losses. Also notice the may, they may be smaller but they also may be higher
2. The industry average for losses due to theft in the electronics distribution field may be low compared to that of other fields.
Irrelevant too, there is no comparison between fields of losses
3. Malco might have been able to achieve an equal increase in revenues over the last decade by increasing its expenditure on
international marketing instead of warehouse security. Malco might have been able but he also might not
4. The expenditures on warehouse security to date may have been sufficient to stop the majority of warehouse thefts.
again may have been sufficient, but maybe they are not
5. Over the last decade, Malco’s spending on warehouse security has increased in proportion to its spending in several other
areas, such as advertising and research and development. This is a great alternative explanation to why his revenues kept growing, not only because of security but also because of advertising and R&D so this is a flaw in his plan. The increased revenue could be coming from more than just the security

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Re: Malco, a prominent electronics manufacturer and distributor, has see  [#permalink]

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New post 28 Dec 2010, 06:26
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1
You can consider this as a cause and effect question.

As per the thinking of the arguement

cause - higher security spending
effect - higher revenues

Now , effect higher revenue can be a result of another cause other than high security also,, which is well explained by E
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Re: Malco, a prominent electronics manufacturer and distributor, has see  [#permalink]

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New post 01 Jun 2017, 02:05
E is appropriate. Because the increase in revenue is not only from the increase in warehouse expenditure.

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Re: Malco, a prominent electronics manufacturer and distributor, has see  [#permalink]

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Re: Malco, a prominent electronics manufacturer and distributor, has see   [#permalink] 24 Sep 2018, 02:30
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