Because production costs are rising, a local theater

Question

Because production costs are rising, a local theater company is planning to maximize its profits by reducing by half the number of plays it stages per season. The quality of performances, their frequency, and the admission price will not change. Furthermore, neither the audience nor the sponsors, an important source of theater funding, is expected to be lost if the plan is instituted.

Which of the following, if true, provides the strongest evidence that the theater's profits are not likely to increase if the plan is instituted?

(A) The majority of theatre goers are concerned about possible loss of production quality.

(B) Most sponsors will continue to donate the same amount of money per production as they have in the past.

(C) Next year's production costs are expected to be on average 20% higher for each production.

(D) Many theater lovers would continue to attend performances regularly even if the admission fee were increased.

(E) Performers' and technical personnel's salaries will not change in the near future.

KarishmaB · Accepted Answer

Production costs are rising.
So reduce number of plays produced per season to maximise profit (lower cost)
Audience and sponsors will not be lost.
Quality, frequency of plays produced and price will not change.

So this is what the argument says - Say currently 10 plays are produced and played during the season (say three months July-Aug-Sept). From now on, only 6 will be produced and played throughout the season. So cost will decrease. In this way, profit is expected to be maximised. Audience and sponsors are expected to stick around.

Which of the following weakens the plan?

(A) The majority of theatre goers are concerned about possible loss of production quality.

Quality will stay the same and theatre goers are expected to not be lost. Any concerns they might have will not impact the plan.

(B) Most sponsors will continue to donate the same amount of money per production as they have in the past.

Here is the twist - most sponsors will donate the same amount PER PRODUCTION. So if they were paying $1000 per production, and hence were paying $10k before, they will not pay only $6k. So though sponsors will not be lost, fewer productions will reduce overall revenue from them. This weakens our plan.

(C) Next year's production costs are expected to be on average 20% higher for each production.

We already know that production costs ARE RISING. Next year costs are expected to be higher. The plan has been made accordingly. It does not weaken our plan.

(D) Many theater lovers would continue to attend performances regularly even if the admission fee were increased.

Irrelevant. Fees will stay the same. What happens if it is increased is irrelevant.

(E) Performers' and technical personnel's salaries will not change in the near future.

It doesn't weaken our plan. This means cost of playing will not increase.

Answer (B)

aks456 · Answer

IMO (B)

(A)The majority of theatergoers are concerned about possible loss of production quality .-Out of scope

(B)Most sponsors will continue to donate the same amount of money per production as they have in the past .-Correct-If the sponsors pay the same amount of money..profit will remain the same

(C)Next year`s production costs are expected to be on average 20% higher for each production. - If production cost is increased and admission fee remains same...the profit will decrease..We don't have to prove that profits will decrease..instead it should not increase (means it can remain the same-narrow scope)-Wrong

(D)Many theater lovers would continue to attend performances regularly even if the admission fee were increased .-If this would have been the case-Increase in admission fee would have resulted in increase in profit... so this actually strengthens the argument

(E)Performers` and technical personnel`s salaries will not change in the near future. -out of scope

akashb106 · Answer

(A)The majority of theatergoers are concerned about possible loss of production quality.---  Incorrect because The argument mentions that there will be no compromise in the quality. 
 
(B)Most sponsors will continue to donate the same amount of money per production as they have in the past.----   CORRECT, because the sponsors pay per production. For example, if Sponsor A is paying $100 per play and the theater company was conducting 6 plays = $600. But now the number is reduced to half. 3 plays and $100 per play = $300. Reduction in money earned which will result in profit decreasing.

(C)Next year`s production costs are expected to be on average 20% higher for each production.---  Out of scope. What happens to the production costs next year is none of our business. 
 
(D)Many theater lovers would continue to attend performances regularly even if the admission fee were increased.  Out of scope. Just gives additional information on what the theater lovers would do even if the admission fees were increased.

(E)Performers` and technical personnel`s salaries will not change in the near future.  Out of scope, the salaries will not change does not explain why there will a reduction in profits.

pritaminamdar · Answer

I have a question regarding E, though answer choice B sounds perfect.

E)Performers` and technical personnel`s salaries will not change in the near future.- Consider theaters get some profit out of this, but salaries of performers and personnel remain the same. This will drop down the profit again. Hence this sounds like a weakener.
Correct me if i am wrong.

tarunanandani · Answer

Even if one assumes that 'theaters would profit out of personnel's salaries' one has to also assume that by decreasing the production cost profit gain would be less than the profit lost in salaries in order to decrease overall profit. And that is a very big assumption to make. Remember the question asks us that in what situation the decrease in production cost would most likely not result in increase in profits. So, option E is not at all a weakener.

Hope this helps!

KaranB1 · Answer

@varitaskrishma  GMATNinja

Can you tell me why E is not a weakener

My understanding- If sal is not reduced, production cost will remain the same hence there won't be an increase in profit.
Although there can be other components of the cost, answer choice B talks about sponsors only.

MartyTargetTestPrep · Answer

Notice what the passage says about how the company plans to reduce costs.

Because production costs are rising,a local theater company is planning to maximize its profits  by reducing by half the number of plays it stages per season .

So, the point is that the company will not be producing as many DIFFERENT PLAYS. So, by reducing the number of different plays it produces, the company plans to spend less, because there are costs associated with producing each play.

Key to answering CR questions is noticing key details, and, in this case, that the plan is to reduce the number of different plays is a key detail that you have to notice.

Notice what else the passage says.

The quality of performances,  their frequency , and the admission price will not change.

Notice that passage says that the frequency of the performances won't change, in other words, that the company plans to have just as many performances as they have had in the past. Accordingly, it seems likely that actors will be working just as much as they have in the past. So, there is no reason to believe that the actors would get paid less. Thus, from what the passage says, the only costs that the company expects to reduce are those associated with producing each unique play.

Now, let's consider E.

(E)Performers` and technical personnel`s salaries will not change in the near future.

(E) is a trap choice, because a test-taker could be tempted to pick (E) by the fact that (E) seems to indicate that costs won't decrease.

At the same time, (E) is clearly incorrect, because it tells us nothing really new. The company's plan is not to reduce costs overall. The plan is to reduce production costs by reducing the number of different plays the company produces, and the fact that the salaries of actors and technical personnel will not change does not affect the success of that plan.

In fact, in a way, (E) strengthens the argument by indicating that these salaries will not change, because if salaries will not change, THEY WON'T INCREASE. So, the fact that salaries will not change adds support to the conclusion that, by reducing the number of plays that the company produces, the company will increase profits.

Now, armed with this information, you could consider (B) again, and I believe that you will see why it is correct.

Raman109 · Answer

Understanding the argument -
Because production costs are rising, a local theater company is planning to maximize its profits by reducing by half the number of plays it stages per season. Fact
The quality of performances, their frequency, and the admission price will not change. Take note of it. Fact.
Furthermore, neither the audience nor the sponsors, an important source of theater funding, is expected to be lost if the plan is instituted. Fact

The conclusion is in question - the theater's profits are not likely to increase if the plan is instituted. The plan will fail.

There is another such argument - Pl goes through it for a detailed understanding. Link if you are interested in learning in-depth - https://gmatclub.com/forum/because-post ... l#p3294144

Option Elimination - Assuming you understood well or have gone through the explanation for better understanding.

(A) The majority of theatre goers are concerned about possible loss of production quality. - Quality stays the same as per argument. Distortion.

(B) Most sponsors will continue to donate the same amount of money per production as they have in the past. - This is a deceiving answer for some of us who are used to glancing and not reading every word correctly. Remember, GMAT doesn't even waste a single word. Now, why is it a deception? The part "Most sponsors will continue to donate the same amount of money" is a fact per the passage. What comes after this is not at all discussed in the passage, and new information is critical. "money per production" means, as we know, it depends on the no. of production. Remember that as per the plan, we reduced the no. of productions by 50%, so if the no. of production is reduced by 50%, then P = R-C, our revenues are significantly impacted negatively regarding absolute number and profitability. This will ensure that the plan of improving profitability will fail.

(C) Next year's production costs are expected to be on average 20% higher for each production. - We reduced the production cost by 50%, and now this option says production cost increases by 20%, so we still have a buffer of 30%. This will still be a better scenario for maximizing profitability than the old scenario.

(D) Many theater lovers would continue to attend performances regularly even if the admission fee were increased. - at best, this is a weakener as it ensures revenues are not going down. We need an option wherein the revenues go down.

(E) Performers' and technical personnel's salaries will not change in the near future. - its impact will be the same for old and new situations. Distortion. Please review the other question link for a deeper understanding of this option.

jpsot · Answer

I honestly dont get why C is wrong

I understand why B is correct though

DmitryFarberMPrep · Answer

jpsot

The argument has already told us that production costs are rising. That's what triggered the changes they're proposing. All C does is put a specific value to that increase. However, we don't know whether a 20% increase is particularly bad, especially since we don't know anything about the profit margin. It's possible that a 20% cost increase is no big deal, and under this plan profits will actually increase. In general, be wary of answer choices that simply quantify something we already know. Unless we're well equipped to do something with those quantities, it's unlikely that they can have any effect on the argument.

JoeSal · Answer

I have a problem with this question. It seems to me that it was not clear that 1 play = 1 production. I was thinking for example, Wicked's (a broadway musical) showing for one season is already 1 production, even if they did 100+ shows.

How did you guys arrive at the conclusion that 1 play = 1 production? But yeah, it makes sense that the other choices were incorrect.

How did you guys arrive at the conclusion that 1 play = 1 production? But yeah, it makes sense that the other choices were incorrect.

Blackcrow1972 · Answer

the theater's plan explicitly accounts for rising production costs, and thus the information in (C) does not weaken the argument.

agrasan · Answer

Hi experts  KarishmaB   GMATNinja 
Just wanted to confirm my reasoning on option B.
Let's say X is funding per performance by sponsors, Y is current production cost per performance
Profit Margin = X - Y

Option B says that X remains same per performance but we know from the argument that Y is increasing, thus, profit margin will decline.
Please let me know if this is way we can go ahead.

RetaketheGMAT · Answer

Hi  agrasan

Be careful and precise when reading the answer choices in CR questions since they are providing the additional information that you are assessing.

What does precise mean?
1. Don't carry information from one answer choice into another. Option C only says average production cost will rise by 20%. It doesn't say anything about sponsor behaviour. 
2. Cutting production numbers by 50% doesn't mean total production costs will drop by 50% -- maybe they're cutting more expensive productions or it could be they are cutting cheaper productions. That missing information could give different answers to whether overall productions will drop with the 20% increase mentioned in Option C.

Option B is more definitive. We know that there will be 50% fewer productions (count). If the sponsor revenue stays the same per production, then we know that overall sponsor revenue will drop by 50%. This definitely indicates lower profits.

When you're reading CR questions, always ask "what is it saying" and "what is it not saying".

sriramsundaram91 · Answer

Again GMAT Trap question

Did you critically read the passage i.e. give more importance to the words and what it could mean?
Example: "  neither the audience nor the sponsors,  an important source of theater funding ", did you read that sponsors are also an important source of theater funding.

Did you understand from the passage that reducing half the number of plays it stages per season is the strategy i.e. if #of plays = 8 per season then it will be reduced to 4, also, did you realise that they could all be different plays?

If theatre lovers still came in after price is increased then the profits are getting better we are here not to strengthen.

If you failed to realise any of the above then you won't get it right.

Because production costs are rising, a local theater

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GMAT Critical Reasoning (CR) Questions

Because production costs are rising, a local theater

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

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