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# Manufacturers sometimes discount the price of a product to

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Manufacturers sometimes discount the price of a product to [#permalink]

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17 Jul 2006, 22:10
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Official Guide for GMAT Verbal Review, 2nd Edition

Practice Question
Question No.: 68
Page: 143
Difficulty:

Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotions often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers' attention to the product.
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
(E) If a manufacturer falls to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.
[Reveal] Spoiler: OA

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17 Jul 2006, 22:22
got D..

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17 Jul 2006, 22:23
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.

If the retailers do not pass on the discount to their customers, then there is no reason for the manufacturers to reduce profit margins and offer the retailers discount. They are better off making higher profits by not offering discounts.

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17 Jul 2006, 22:25
ps_dahiya wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotions often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers' attention to the product.
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
(E) If a manufacturer falls to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.

I go with D

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17 Jul 2006, 22:41
Clear winner D.

With D is true, then the bulk of the profits would go to the retailers instead of the manufacturers.

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17 Jul 2006, 22:53
it is D
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18 Jul 2006, 10:41
recognize the OG question it is D

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18 May 2008, 12:34
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers’ profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers’ attention to the product.

(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.

(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.

(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.

(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer’s product.
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18 May 2008, 12:45
D

A - unrelated
B - not logical, why do consumers need to get used to the sale price?
C - unrelated, sales can be of established products too
C - out of scope, does not address the question.

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18 May 2008, 18:35
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prasannar wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers’ profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers’ attention to the product.

(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.

(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.

(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.

(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer’s product.

The very interesting in GMAC reasoning is making a confusal to test taker, I think so!

Let see the slighly modification I made on this, and you will see that it is easier than it actually is!

Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. So, the manufacturers can increase their profit by holding promotions.

Which of the following, if true, most strongly shows that the manufacturers CAN NOT get the goal?

Stop and you see that at the very first sentence, the author appraise how good and best promotion can help increase sales of the manufacturers. But why it does not help increase profits. There must be something problemetic in "promotions"

ATTACK THE PROMOTIONS is slogan!
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20 May 2008, 14:59
i go with D as well..

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06 Mar 2011, 12:25
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Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minumum needed to draw consumers' attention to the product.
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the midst of consumers and to attract consumers who are currently using competing products.
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitors will tend to attract consumers away from the manufacturer's product
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06 Mar 2011, 13:00
Baten80 wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minumum needed to draw consumers' attention to the product. - Doesnt impact manufacturer's profit when not holding promotions
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale - Consumer awareness about Sale does not impact manufacture profitability in non discount period
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the midst of consumers and to attract consumers who are currently using competing products. Again, no relevance to profitability
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price. If retailers buy more product then needed during this period, then it means lower profit for manufacturer during regular season and hence not offering such discounts can actually increase manufacturer profit, so correct
(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitors will tend to attract consumers away from the manufacturer's product -has no bearing on profitability

Answer should be D. Whats the OA and OE?

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06 Mar 2011, 13:08
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beyondgmatscore wrote:
Baten80 wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minumum needed to draw consumers' attention to the product. - Doesnt impact manufacturer's profit when not holding promotions
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale - Consumer awareness about Sale does not impact manufacture profitability in non discount period
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the midst of consumers and to attract consumers who are currently using competing products. Again, no relevance to profitability
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price. If retailers buy more product then needed during this period, then it means lower profit for manufacturer during regular season and hence not offering such discounts can actually increase manufacturer profit, so correct
(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitors will tend to attract consumers away from the manufacturer's product -has no bearing on profitability

Answer should be D. Whats the OA and OE?

You are correct but,
Will not retailers pay to manufacturers for their purchase from manufacturer? If retailers buy more then manufacturer will get more money either retailer sell or store. What is my wrong.
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06 Mar 2011, 13:44
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Baten80 wrote:
beyondgmatscore wrote:
Baten80 wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minumum needed to draw consumers' attention to the product. - Doesnt impact manufacturer's profit when not holding promotions
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale - Consumer awareness about Sale does not impact manufacture profitability in non discount period
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the midst of consumers and to attract consumers who are currently using competing products. Again, no relevance to profitability
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price. If retailers buy more product then needed during this period, then it means lower profit for manufacturer during regular season and hence not offering such discounts can actually increase manufacturer profit, so correct
(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitors will tend to attract consumers away from the manufacturer's product -has no bearing on profitability

Answer should be D. Whats the OA and OE?

You are correct but,
Will not retailers pay to manufacturers for their purchase from manufacturer? If retailers buy more then manufacturer will get more money either retailer sell or store. What is my wrong.

Retailers will pay to manufacturers but they will pay a discounted price which has a direct bearing on the profit made by the manufacturer.

Try and understand it numerically - lets say 100 units of the product are sold every year in total including during the discount period with say 10 units coming during discounted period and 90 during full price season. What option C is saying is that retailers would probably buy much greater number of units than 10 (say 50) at discounted price from manufacturer and then sell the excess at at marked price without any discount. Thus, promotions has resulted in reduced profit for manufacturer. On the other hand, if there were no promotions, manufacturer would have sold at least 90 units at full price.

Does it make sense?

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06 Mar 2011, 16:09
I think beyondgmatscore did a good job explaining this question .
Anyways here is my take on this ::
Manuf Guy ( MG) , retailer guy ( RG)
MG----->RG---->PEOPLE !

this is how this chain works
We are concerned about MG's profits
so if MG offers a discount to increase it's consumer base ( during promotion period) , and RG acts as a middlemen and keeps the stuff for himself and later sells it at a higher price so he is essentially helping himself( the amount of money earned by RG is equal to the discount btw !) , so if MG would not have kept this PROMOTION PERIOD deal things he would have not lost on anything , rather thn saved on the discount that RG ripped from him so in conclusion RG is a kewl guy and MG is a sucker :p
Good problem btw ..
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Last edited by akshathbs on 06 Mar 2011, 18:21, edited 1 time in total.

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06 Mar 2011, 18:17
Baten80 is right!

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06 Mar 2011, 21:05
beyondgmatscore wrote:
Answer should be D. Whats the OA and OE?

+1

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06 Mar 2011, 21:28
Answer is D, it supposrts most strongly. Retailers are the one who benefit, neither manufacturers, nor customers.

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08 Mar 2011, 12:28

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Re: Discount for promotion   [#permalink] 08 Mar 2011, 12:28

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