Quote:
The value of a company’s inventory is found by subtracting the total dollar value of units sold from the total dollar value of units produced. The Acme Company only produces ball bearings. Acme sold the same number of ball bearings this year as last year, while the dollar value of units produced stayed constant. Nevertheless, the value of Acme’s inventory this year is greater than that of last year.
The statements above, if true, best support which of the following conclusions?
A) Acme started selling a new model of ball bearing this year.
B) Acme’s shipping costs rose this year over last year.
C) Acme produced more ball bearings this year than last year.
D) Acme lowered the sale price of its ball bearings this year.
E) Acme’s competition sold more ball bearings this year than did Acme.
KAPLAN OFFICIAL EXPLANATIONIdentify the Question Type:
The question asks for something that "the statements above... best support." That makes this an Inference question.
Untangle the Stimulus:
The stimulus provides a formula for calculating the value of a company's inventory: Take the dollar value of the units produced and subtract the dollar value of units sold:
Inventory value = $ Units Produced - $ Units sold
The stimulus then describes what happened for Acme. Acme sold the same number of units and the dollar value of the units produced remained constant. "Nevertheless," the value of inventory is larger this year.
Predict an Answer:
According to the formula, inventory value is calculated using two dollar values: that of the units produced, and that of the units sold. The stimulus says that the value of the units produced remained constant. In order to have a large inventory value, you would have to subtract a lower value of units sold. However, the stimulus merely states that the number of units sold is constant. That means the same number of units were sold for a lower dollar value. That can only mean the units were sold for less money.
Evaluate the Choices:
(D) is supported and is correct. With production value and number of units sold remaining constant, inventory can only increase in value if the dollar value of sales was lower -- which means the bearing were sold at a lower price.
(A) is not supported. The stimulus only talks about numbers and dollar values, not different types of ball bearings.
(B) is not supported. Shipping costs are never discussed and not factored into any of the values mentioned.
(C) is not supported. All that's states is that the value of the bearings produced stayed constant. The number of bearings cannot be determined from that. If the bearings are more valuable individually, there were would be fewer bearings for the same dollar value. If the bearing are cheaper individually, there would be more bearings.
(E) is not supported. The information provides no basis for judging how any other company performed last year.
TAKEAWAY: Even when the math gets a little heavy, wrong answers can often be easily eliminated by finding concepts never addressed by the stimulus.