Last visit was: 21 Jul 2024, 09:45 It is currently 21 Jul 2024, 09:45
Toolkit
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Request Expert Reply

# The Maxilux car company's design for its new luxury model, the Max 100

SORT BY:
Tags:
Show Tags
Hide Tags
Intern
Joined: 11 Jul 2012
Posts: 45
Own Kudos [?]: 6726 [227]
Given Kudos: 0
Most Helpful Reply
Manhattan Prep Instructor
Joined: 05 Jun 2012
Posts: 71
Own Kudos [?]: 501 [84]
Given Kudos: 3
Location: United States
Schools: UCSD (Rady) - Class of 2011
GMAT 1: 760 Q49 V44
GPA: 3.7
WE:Education (Education)
Director
Joined: 03 Feb 2011
Status:Retaking after 7 years
Posts: 860
Own Kudos [?]: 4530 [29]
Given Kudos: 221
Location: United States (NY)
Concentration: Finance, Economics
GMAT 1: 720 Q49 V39
GPA: 3.75
General Discussion
Senior Manager
Joined: 17 Mar 2010
Status:Final Countdown
Posts: 319
Own Kudos [?]: 1333 [11]
Given Kudos: 76
Location: United States (NY)
GPA: 3.82
WE:Account Management (Retail Banking)
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
8
Kudos
2
Bookmarks
In real world , (D) would not work.Changing of worn out tire of luxury car require time (say a year;unlike sports cars which gets worn out in few minutes)and hence earning an upfront profit is not easy.Also , it is mentioned that just for the looks people will buy the matching company's tire compulsorily , again, it means that the sale of the stepney is a slow process.
(B) can be a good deal upfront, so that the tire manufacturer will be able to adjust profit margin through the tires for other models of car.
Manager
Joined: 31 Aug 2011
Posts: 121
Own Kudos [?]: 807 [5]
Given Kudos: 56
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
4
Kudos
1
Bookmarks
analysts said that there will be no profit in this bid . .co says there will be profit due to this bid. the profit can come from some other sale than the sale to company

hence D ,

A was a strong contender but its not mentioned that spare tyre was part of bid or not (if not part of bid then can have different price than the bid price)
Manager
Joined: 07 Aug 2010
Status:Now or never
Posts: 248
Own Kudos [?]: 476 [3]
Given Kudos: 27
Location: India
Concentration: Strategy, Technology
GPA: 3.5
WE:Consulting (Consulting)
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
3
Kudos
rjacobsMGMAT wrote:
(D). Profit = Revenue - Cost. The premises show that revenue from Maxilux will equal cost. So to strengthen the argument, we need additional revenue from elsewhere. (B) is close because it generates additional revenue, but that revenue is also from Maxilux so the revenue will most likely not exceed the cost here either. (D) is the only answer choice that adds the kind of outside revenue stream we want.

@rjacobsMGMAT , great explanation, I marked C thinking that Analysts are not aware of the distance related costs and Co executives are, and that these co executives are sure of saving some cost in transportation. However it would be assuming too much I think. Please shed some light
Intern
Joined: 29 Dec 2011
Posts: 28
Own Kudos [?]: 348 [1]
Given Kudos: 29
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
1
Kudos
The Maxilux car company's design for its new luxury model, the Max 100, included a special design for the tires that was intended to complement the model's image. The winning bid for supplying these tires was submitted by Rubco. Analysts concluded that the bid would only just cover Rubco's costs on the tires, but Rubco executives claim that winning the bid will actually make a profit for the company.

Which of the following, if true, most strongly justifies the claim made by Rubco's executives?

(A) In any Maxilux model, the spare tire is exactly the same make and model as the tires that are mounted on the wheels.

(B) Rubco holds exclusive contracts to supply Maxilux with the tires for a number of other models made by Maxilux.

(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.

(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.

(E) When Maxilux awarded the tire contract to Rubco, the only criterion on which Rubco's bid was clearly ahead of its competitors' bids was price.

-----------------------------
Can someone help me guide through the answer choices for this?

Many thanks.
Director
Joined: 03 Feb 2011
Status:Retaking after 7 years
Posts: 860
Own Kudos [?]: 4530 [2]
Given Kudos: 221
Location: United States (NY)
Concentration: Finance, Economics
GMAT 1: 720 Q49 V39
GPA: 3.75
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
1
Kudos
1
Bookmarks
elegan wrote:
The Maxilux car company's design for its new luxury model, the Max 100, included a special design for the tires that was intended to complement the model's image. The winning bid for supplying these tires was submitted by Rubco. Analysts concluded that the bid would only just cover Rubco's costs on the tires, but Rubco executives claim that winning the bid will actually make a profit for the company.

Which of the following, if true, most strongly justifies the claim made by Rubco's executives?

(A) In any Maxilux model, the spare tire is exactly the same make and model as the tires that are mounted on the wheels.

(B) Rubco holds exclusive contracts to supply Maxilux with the tires for a number of other models made by Maxilux.

(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.

(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.

(E) When Maxilux awarded the tire contract to Rubco, the only criterion on which Rubco's bid was clearly ahead of its competitors' bids was price.

-----------------------------
Can someone help me guide through the answer choices for this?

Many thanks.

In this question you have to prove that even though company's bid just covers the Rubco's costs on the tyres, it will eventually lead to profits for the company. Certainly if there are long term profits, then its a good sign for the company.
On looking at the options, only D makes sense in that it explicity states that when people who purchased MAX 100 need to replace a worn part of it such as tyres, people will replace it with the same make and type, leading to huge profits for the company.
Hope that helps.
-s
Intern
Joined: 21 Jun 2011
Posts: 47
Own Kudos [?]: 109 [0]
Given Kudos: 15
Location: United States
Concentration: Accounting, Finance
WE:Accounting (Accounting)
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
Marcab wrote:
elegan wrote:
The Maxilux car company's design for its new luxury model, the Max 100, included a special design for the tires that was intended to complement the model's image. The winning bid for supplying these tires was submitted by Rubco. Analysts concluded that the bid would only just cover Rubco's costs on the tires, but Rubco executives claim that winning the bid will actually make a profit for the company.

Which of the following, if true, most strongly justifies the claim made by Rubco's executives?

(A) In any Maxilux model, the spare tire is exactly the same make and model as the tires that are mounted on the wheels.

(B) Rubco holds exclusive contracts to supply Maxilux with the tires for a number of other models made by Maxilux.

(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.

(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.

(E) When Maxilux awarded the tire contract to Rubco, the only criterion on which Rubco's bid was clearly ahead of its competitors' bids was price.

-----------------------------
Can someone help me guide through the answer choices for this?

Many thanks.

In this question you have to prove that even though company's bid just covers the Rubco's costs on the tyres, it will eventually lead to profits for the company. Certainly if there are long term profits, then its a good sign for the company.
On looking at the options, only D makes sense in that it explicity states that when people who purchased MAX 100 need to replace a worn part of it such as tyres, people will replace it with the same make and type, leading to huge profits for the company.
Hope that helps.
-s

I thought the OA would be between C & D. Shouldn't C win over D because In 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.) the contract was for tyres. This option talks about worn parts and not specific to tyres. So increasing the scope of the argument.
Further Profit also means SP-CP. So in C, which states that the transportation cost to be less (the plants being near) actually says that the CP would be less, which indirectly means more profit...
Please let me know if I am thinking wrong here...
Manager
Joined: 13 Feb 2010
Status:Prevent and prepare. Not repent and repair!!
Posts: 145
Own Kudos [?]: 428 [13]
Given Kudos: 282
Location: India
Concentration: Technology, General Management
GPA: 3.75
WE:Sales (Telecommunications)
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
11
Kudos
2
Bookmarks
betterscore wrote:
The Maxilux car company's design for its new luxury model, the Max 100, included a special design for the tires that was intended to complement the model's image. The winning bid for supplying these tires was submitted by Rubco. Analysts concluded that the bid would only just cover Rubco's costs on the tires, but Rubco executives claim that winning the bid will actually make a profit for the company.

Which of the following, if true, most strongly justifies the claim made by Rubco's executives?

(A) In any Maxilux model, the spare tire is exactly the same make and model as the tires that are mounted on the wheels.

(B) Rubco holds exclusive contracts to supply Maxilux with the tires for a number of other models made by Maxilux.

(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.

(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.

(E) When Maxilux awarded the tire contract to Rubco, the only criterion on which Rubco's bid was clearly ahead of its competitors' bids was price.

Ok Let us put this down as points

1.Rubco won the bid.
2.Analysts conclude Rubco wont make any profit.
3.BUT, Rubco claims that it actually makes profit.

How is it possible?? There has to be a way out....

Option A -Out of scope. We need to show that Rubco will make profit in some way.
Option B- is close but it is not addressing the issue. We need to address how this bid will generate profits. Here it talks about the other products etc.
Option C- WE cannot conclusively say that there is profit if the plants are closer
Option D- This is a constraint on the customer. So there will be extra revenue generated and hence profits for Rubco.
Option E - Out of scope.
Manager
Joined: 22 Nov 2010
Posts: 202
Own Kudos [?]: 499 [16]
Given Kudos: 75
Location: India
GMAT 1: 670 Q49 V33
WE:Consulting (Telecommunications)
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
13
Kudos
3
Bookmarks
The Maxilux car company's design for its new luxury model, the Max 100, included a special design for the tires that was intended to complement the model's image. The winning bid for supplying these tires was submitted by Rubco. Analysts concluded that the bid would only just cover Rubco's costs on the tires, but Rubco executives claim that winning the bid will actually make a profit for the company.

Which of the following, if true, most strongly justifies the claim made by Rubco's executives?

(A) In any Maxilux model, the spare tire is exactly the same make and model as the tires that are mounted on the wheels.
Talks about Make & model. States nothing about price, cost or profit

(B) Rubco holds exclusive contracts to supply Maxilux with the tires for a number of other models made by Maxilux.
Note: Other models---> although new info but OFS . No information about the cost/ price/profitability of the deal

(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.
so what? It will only help in logistics & operations

(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.Correct. Strengthening in GMAT style i.e. just a slight push to strengthen the claim. It just hints that sales of wheels may increase due to replacement. why not B? - Note the scope here : same model --> same design ---> same tires. But in B it states about other models

(E) When Maxilux awarded the tire contract to Rubco, the only criterion on which Rubco's bid was clearly ahead of its competitors' bids was price.
This only tells about the criterion
Intern
Joined: 27 Mar 2013
Posts: 2
Own Kudos [?]: [0]
Given Kudos: 14
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
I found this question interesting because I disagree with the OA explanations:

How can you claim that analysts would factor in that two sites are close to each other but not consider that winning a contract will strenghen the postion for residual sales of spare parts. I would argue that any analyst should be aware of such a general claim and therefore would price that into his or her considerations. With that logic I would tilt towards the less wrong b - although amigious I can still argue that those future sales are probably priced differently into the analysts expectations.

Anyone share that though?
Intern
Joined: 18 Jun 2013
Posts: 4
Own Kudos [?]: 13 [1]
Given Kudos: 3
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
1
Bookmarks
solve58 wrote:
I found this question interesting because I disagree with the OA explanations:

How can you claim that analysts would factor in that two sites are close to each other but not consider that winning a contract will strenghen the postion for residual sales of spare parts. I would argue that any analyst should be aware of such a general claim and therefore would price that into his or her considerations. With that logic I would tilt towards the less wrong b - although amigious I can still argue that those future sales are probably priced differently into the analysts expectations.

Anyone share that though?

"Analysts concluded that the bid would only just cover Rubco's costs on the tires, but Rubco executives claim that winning the bid will actually make a profit for the company"

I ruled out B because it does not address issue brought up in Rubco's executives' claim. The issue involves the profit that results from the bid directly, nothing else.

D is the only statement that directly addresses profit making from winning this particular bid.
Current Student
Joined: 10 Mar 2013
Posts: 359
Own Kudos [?]: 2738 [3]
Given Kudos: 200
Location: Germany
Concentration: Finance, Entrepreneurship
GMAT 1: 580 Q46 V24
GPA: 3.7
WE:Marketing (Telecommunications)
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
3
Kudos
rjacobsMGMAT wrote:
(D). Profit = Revenue - Cost. The premises show that revenue from Maxilux will equal cost. So to strengthen the argument, we need additional revenue from elsewhere. (B) is close because it generates additional revenue, but that revenue is also from Maxilux so the revenue will most likely not exceed the cost here either. (D) is the only answer choice that adds the kind of outside revenue stream we want.

In my opinion the only reason to eliminate (B) is that, the exclusive contracts are already held by RUBCO , so the new bid will not change anything with that.
D is the only relevant option, but as for me still not clear as we're talking about profits and there is nowhere stated in this answer choice that the price will be greater than the price in the bid.... we could have more revenues but "0" Profit.
IIM School Moderator
Joined: 04 Sep 2016
Posts: 1253
Own Kudos [?]: 1265 [0]
Given Kudos: 1207
Location: India
WE:Engineering (Other)
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
Hi GMATNinja GMATNinjaTwo

Can you suggest if (A) weakens the claim:
If Rubco had to supply additional spare tires their profits will eventually get down.
GMAT Club Verbal Expert
Joined: 13 Aug 2009
Status: GMAT/GRE/LSAT tutors
Posts: 6990
Own Kudos [?]: 64549 [6]
Given Kudos: 1823
Location: United States (CO)
GMAT 1: 780 Q51 V46
GMAT 2: 800 Q51 V51
GRE 1: Q170 V170

GRE 2: Q170 V170
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
5
Kudos
1
Bookmarks
Expert Reply
adkikani wrote:
Hi GMATNinja GMATNinjaTwo

Can you suggest if (A) weakens the claim:
If Rubco had to supply additional spare tires their profits will eventually get down.

Quote:
(A) In any Maxilux model, the spare tire is exactly the same make and model as the tires that are mounted on the wheels.

Based on the wording of choice (A) ("In any Maxilux model, the spare tire...), I think it's safe to infer that the model in question comes with a spare tire. It would be a stretch to assume that the bid did NOT include budget for a spare tire and that Rubco now has to go out and supply additional tires. In other words, if the model needed 5 tires (including a spare), the contract would have included 5 tires.

So choice (A) doesn't really impact the claim. We would have to make some big assumptions to conclude that this is a weakener.

I hope that helps!
Manager
Joined: 27 Nov 2015
Posts: 87
Own Kudos [?]: 39 [0]
Given Kudos: 325
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
(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?
GMAT Club Verbal Expert
Joined: 13 Aug 2009
Status: GMAT/GRE/LSAT tutors
Posts: 6990
Own Kudos [?]: 64549 [10]
Given Kudos: 1823
Location: United States (CO)
GMAT 1: 780 Q51 V46
GMAT 2: 800 Q51 V51
GRE 1: Q170 V170

GRE 2: Q170 V170
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
4
Kudos
6
Bookmarks
Expert Reply
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!
Intern
Joined: 11 Sep 2017
Posts: 26
Own Kudos [?]: 51 [0]
Given Kudos: 49
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
i feel next to option d , option a is kindof close contender, with an assumption bid doesnt cover the cost of spare. then it will add extra revenue . how come option B i dont know it is easy to eliminate as it dont talk about the bid in question..

anybody sharing same thought?
GMAT Club Legend
Joined: 15 Jul 2015
Posts: 5318
Own Kudos [?]: 4736 [2]
Given Kudos: 660
Location: India
GMAT Focus 1:
715 Q83 V90 DI83
GMAT 1: 780 Q50 V51
GRE 1: Q170 V169
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
2
Kudos
Expert Reply
Cheryn wrote:
i feel next to option d , option a is kindof close contender, with an assumption bid doesnt cover the cost of spare. then it will add extra revenue . how come option B i dont know it is easy to eliminate as it dont talk about the bid in question..

anybody sharing same thought?
But how good is that assumption? We would expect the spare tire to be part of the contract between Maxilux and Rubco. Also, the conclusion is about profits, not revenue.

Your reasoning for B is correct: option B doesn't show us how winning this bid will lead to a profit for Rubco. It just says that there are other contracts that the company has with Maxilux.
Re: The Maxilux car company's design for its new luxury model, the Max 100 [#permalink]
1   2   3
Moderators:
GMAT Club Verbal Expert
6990 posts
GMAT Club Verbal Expert
236 posts
CR Forum Moderator
824 posts