nausherwan wrote:
(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.
I am not sure why C is incorrect. To me it seems that if the facilities are near to each other then Rubco will be able to save on transportation.
(D) When people who have purchased a carefully designed luxury automobile need to replace a worn part of it, they almost invariably replace it with a part of exactly the same make and type.
Now with regards to D, I thought that even if there are people who purchase the worn out part, they may not be enough in numbers to cover the cost of the tyre...
Can someone help me on this please?
To answer this question, we need to justify the Rubco executives' claim that "winning the bid will actually make a profit for the company," despite the analysts' conclusion that "the bid would only just cover Rubco's costs on the tires."
Take another look at answer choice (C):
Quote:
(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.
This answer choice seems to imply that the transportation costs for Rubco to get the tires to the Max 100 production facility would be low. The problem is,
we don't know if the analysts already factored this into their conclusion. Without more information on what "costs" the analysts did or did not take into account when reaching their conclusion, we cannot assume that the distance between the two production facilities would change their analysis in any way. Thus, we cannot assume that Rubco would actually make a profit as claimed by the company executives. (C) is out.
In your analysis of answer choice (D), you say "even if there are people who purchase the worn out part, they may not be enough in numbers to cover the cost of the tyre." But
we already know that the bid would "just cover Rubco's costs." We have no reason to believe that Rubco is losing money on this bid. The conclusion we're trying to explain is that Rubco will make a
profit as a result of winning the bid.
Now look again at (D):
Quote:
(D) When people who have purchased a carefully designed luxury automobile need to replace a worn part of it, they almost invariably replace it with a part of exactly the same make and type.
This choice implies that
in addition to providing tires to Maxilux at the price in their bid, Rubco can expect to sell replacement tires to people who purchase the Max 100. These replacement tires
are not part of the bid, so they can be sold at a different price. That's why Rubco could make a profit by winning the bid, even if analysts are correct that the company will only just cover their costs in supplying the tires to Maxilux. (D) is correct.
I hope that helps!