Recent audits revealed that BanqueCard, a credit service, has erred in

Question

Recent audits revealed that BanqueCard, a credit service, has erred in calculating the interest it charges its clients. But BanqueCard's chief accountant reasoned that the profits that the company shows would remain unaffected by a revision of its clients' credit statements to correct its previous billing errors, since just as many clients had been overcharged as undercharged.

Which of the following is a reasoning error that the accountant makes in concluding that correcting its clients' statements would leave BanqueCard's profits unaffected?

(A) Relying on the reputation of BanqueCard as a trustworthy credit service to maintain the company's clientele after the error becomes widely known

(B) Failing to establish that BanqueCard charges the same rates of interest for all of its clients

(C) Overlooking the possibility that the amount by which BanqueCard's clients had been overcharged might be greater than the amount by which they had been undercharged

(D) Assuming that the clients who had been overcharged by BanqueCard had not noticed the error in their credit bills

(E) Presupposing that each one of BanqueCard's clients had either been overcharged or else had been undercharged by the billing error

yash312 · Answer

Imo C

It shows the flaw in the reasoning of the accountant as the accountant just states the number of people over and under being same, the accountant does not see that the amount charged over could be more than the total money charged to people under

Overlooking the possibility that the amount by which BanqueCard's clients had been overcharged might be greater than the amount by which they had been undercharged

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dmcquiter · Answer

C is the answer.

Almost chose B, but we don't care about the interest rate for ALL clients, only those over and undercharged. Also even if B was limited to the affected population, the actual interest rate =/ amount by which they may have been over or undercharged.

Success2003 · Answer

I chose D

I see why C is correct, but why can’t D also be correct?

If the client’s noticed that they had been overcharged, then they won’t pay the amount they’d been overcharged with and that would affect their profit because

napolean92728 · Answer

Correct Answer: (C) 
Reason: The accountant assumes that because the number of clients overcharged equals the number of clients undercharged, the total financial effect will cancel out. However, this ignores the possibility that the total amount of overcharges might be larger than the total amount of undercharges. If BanqueCard overcharged clients by a larger total amount than it undercharged, then correcting the errors would reduce its profits.

Eliminating the Other Options: 
 (A)  Relying on the reputation of BanqueCard as a trustworthy credit service to maintain the company's clientele after the error becomes widely known
❌ Incorrect: The argument is about whether correcting billing errors will affect profits, not about whether BanqueCard will maintain its clientele. While reputation could be a relevant concern for long-term profitability, it is not a flaw in the accountant's reasoning about the immediate financial impact of corrections.

(B)  Failing to establish that BanqueCard charges the same rates of interest for all of its clients
❌ Incorrect: The issue is not whether interest rates vary among clients. Even if different interest rates apply, the key flaw in reasoning is assuming that overcharges and undercharges cancel out without considering their total monetary impact.

(D)  Assuming that the clients who had been overcharged by BanqueCard had not noticed the error in their credit bills
❌ Incorrect: Whether or not clients noticed the errors does not affect the conclusion about BanqueCard’s profits. The argument focuses on the company's overall financial standing rather than individual client awareness.

(E)  Presupposing that each one of BanqueCard's clients had either been overcharged or else had been undercharged by the billing error
❌ Incorrect: Even if some clients were charged correctly, the critical issue is whether the total amount of overcharging equals the total amount of undercharging. This option does not address the key flaw in the accountant’s reasoning.

Su1206 · Answer

Success2003

An assumption is something that the author of the statement (In this case the accountant) should believe to be true. That may or may not be true in real life, but as long as author believes it, its a valid assumption.

Lets examine option D

Assuming that the clients who had been overcharged by BanqueCard had not noticed the error in their credit bills - Does the accountant need to assume that error went unnoticed? Not at all. The clients may have noticed, yet the accountant's statement may hold true.

Thus Option D is incorrect as it says the accountant has assumed something he clearly didnt.

Hope this helps.

Cheers, 
 Su!

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