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# Mechanicorp s newest product costs so little to make that it

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Manager
Joined: 04 Jan 2008
Posts: 114
Mechanicorp s newest product costs so little to make that it  [#permalink]

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10 Sep 2008, 23:30
2
7
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Difficulty:

35% (medium)

Question Stats:

70% (01:25) correct 30% (01:33) wrong based on 385 sessions

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Mechanicorp’s newest product costs so little to make that it appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit: potential clients would simply not believe that something so inexpensive would really work. Yet Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins.

The statements above, if true, most strongly support which of the following?

(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.
(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.
(C) Mechanicorp made a significant computational error in calculating the production costs for its newest product.
(D) Mechanicorp’s newest product is intended to perform tasks that can be performed by other devices costing less to manufacture.
(E) Mechanicorp’s production processes are designed with the same ingenuity as are the products that the company makes.
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Re: Mechanicorp s newest product costs so little to make that it  [#permalink]

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11 Sep 2008, 02:43
dancinggeometry wrote:
Mechanicorp’s newest product costs so little to make that it appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit: potential clients would simply not believe that something so inexpensive would really work. Yet Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins.

The statements above, if true, most strongly support which of the following?

(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.
(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.
(C) Mechanicorp made a significant computational error in calculating the production costs for its newest product.
(D) Mechanicorp’s newest product is intended to perform tasks that can be performed by other devices costing less to manufacture.
(E) Mechanicorp’s production processes are designed with the same ingenuity as are the products that the company makes.

I choose B as my answer. Here is why:

(A) encounter difficulties? why? it says in the argument that the company's product is so cheap to make. also, even if the company increases its usually allowed markup for this new product, potential customers would still not believe that such an inexpensive product will work. So customers still believe that the final price of the product is at most fair. So the company's reputation is still not threatened here.

(B) Correct because if customers wonder how on earth will this company still make a profit, it's probably because the company plans to mass sell its new product. so that can financially justify the company's decision to go ahead with this strategy.

(C) We don't know whether there was a computational error. Nothing like that was mentioned in the argument.

(D) We don't even know what is the task of this product. All we know about this product is that it's new and it's markup will be increased at a higher rate than usual.

(E) We don't know how similar is this new product to the company's other previous products.

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Joined: 29 Mar 2008
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Re: Mechanicorp s newest product costs so little to make that it  [#permalink]

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11 Sep 2008, 22:20
(A) for me because:
The cost to manufacture is very less and and also if the company wants to sell the product, they have to increase the mark up which is bound to increase the profit. Since the company's reputation is built on fair prices and modest profits, the company will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.
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Joined: 29 Sep 2009
Posts: 383
GMAT 1: 690 Q47 V38
Re: Mechanicorp s newest product costs so little to make that it  [#permalink]

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14 Dec 2010, 14:50
Contenders:
B: Incorrect because nothing is mentioned about the profit level
E: Nothing is mentioned about their production processes being ingenuous.

A is the correct answer(But I am concerned with level of certainty intended by "will")

Source of this question: GMAT Paper based test and the OA is A.
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Joined: 16 Oct 2010
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Location: Pune, India
Re: Mechanicorp s newest product costs so little to make that it  [#permalink]

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20 Dec 2010, 13:22
2
1
dancinggeometry wrote:
Mechanicorp’s newest product costs so little to make that it appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit: potential clients would simply not believe that something so inexpensive would really work. Yet Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins.

The statements above, if true, most strongly support which of the following?

(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.
(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.
(C) Mechanicorp made a significant computational error in calculating the production costs for its newest product.
(D) Mechanicorp’s newest product is intended to perform tasks that can be performed by other devices costing less to manufacture.
(E) Mechanicorp’s production processes are designed with the same ingenuity as are the products that the company makes.

Since we have multiple answers for this question, let us analyze it.

We are looking for 'the statements above support which of the following' so basically for the statement that can be inferred from the given premises i.e. for the conclusion. Remember, a conclusion never gives us new information. It only re-states what is mentioned in the premises.

Premises:
1. Newest product costs very little to make
2. It appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit (lets say the company marks up its goods by 20% to allow for profit - it will need to increase this %) because potential clients would simply not believe that something so inexpensive would really work.
3. Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins.

So the new product costs very little to produce but the company will be unable to sell if it takes a modest profit because customers will not believe that a cheap product can work. To promote sales, it will have to take a higher profit margin. If the company does take a bigger profit, its reputation (of fair prices and modest margins) will be at stake.

(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.

This is what we can infer from the premises. Hence it is the correct option.

(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.

We do not know whether it achieves large annual profits. We only know that it makes modest profits per product. Overall whether its profits are modest or large, premises do not tell us. They also do not tell us whether the company has high volumes of sales. Hence this is not something we can infer from the argument.
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Joined: 11 Nov 2014
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Concentration: Marketing, Finance
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Re: Mechanicorp s newest product costs so little to make that it  [#permalink]

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11 May 2015, 02:48
Company's product cost - So little (mark up price Suppose - 100, profit - 20).
Clients would simply not believe that something so inexpensive would really work.
Company should mark up its cheap product's price again (new markup - 150 , profit - 70) .
Yet company's reputation is built on fair prices incorporating only modest profit margins.
(this says Company cannot hike its product price to maintain its reputation.)
This question is an inference question.
and in inference questions we have only two correct choices
1.Paraphrase("restates in different words what is stated in the stimulus")
2.Combination("Result from the combination of two or more stimulus statements.")

Then option A correctly restates what is mentioned in stimulus
(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.

I hope this helps.
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Re: Mechanicorp s newest product costs so little to make that it  [#permalink]

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14 Mar 2018, 10:56
(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation. -> connect directly with the argument
(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.
(C) Mechanicorp made a significant computational error in calculating the production costs for its newest product.
(D) Mechanicorp’s newest product is intended to perform tasks that can be performed by other devices costing less to manufacture.
(E) Mechanicorp’s production processes are designed with the same ingenuity as are the products that the company makes.
[Reveal] Spoiler: OA
Senior Manager
Joined: 15 Oct 2017
Posts: 276
Re: Mechanicorp s newest product costs so little to make that it  [#permalink]

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15 Mar 2018, 05:16
In a Must Be True question, it is required to stay within the scope of the argument. Hence, C,D and E are out as they bring new information. Between A and B, B states the company achieves profit whereas the question stem says it is doubtful that the company will be able to sell unless it changes pricing. B is therefore not inferred and hence incorrect answer choice. Therefore, A.
Re: Mechanicorp s newest product costs so little to make that it &nbs [#permalink] 15 Mar 2018, 05:16
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