Megalimpet is a nationwide owner of office space. They have major off

Question

Megalimpet is a nationwide owner of office space. They have major office buildings in the downtowns of several cities in the 48 lower states, and rent this space to individual companies. Megalimpet office spaces vary from small office to large suites, and every space has custom-designed wall-to-wall carpeting. The carpet in several Megalimpet facilities needed replacing. The winning bid for the nationwide carpet replacement was submitted by Bathyderm Carpet Company (BCC). The bid contract involves all delivery costs, all installation, and any ongoing maintenance and upkeep while the carpet is under the three-year warranty. Both BCC executives and independent consultants they hired felt BCC would be able to perform all these services for far less than their bid price; these circumstances would allow BCC to reap a considerable profit.

Which of the following, if true, most calls in question the argument that BCC will make a large profit from this contract with Megalimpet?

A. All the carpets will have to be transported by train from BCC factory in Louisville, KY, to Megalimpet’s locations from coast to coast.

B. BCC has already supplied carpets to a number of restaurant chains, and some of those spaces are as large as Megalimpet’s largest office spaces.

C. The carpet installation teams will have to cut different sizes of the carpets for the different size office suites in the Megalimpet buildings.

D. The material in BCC carpets degrades rapidly when it comes into contact with standard toner, found in most laser printers and photocopiers; the degraded sections are unsightly and smell bad, so they often need to be replaced.

E. The next competing bid after BCC’s was 50% higher than BCC’s bid

himanshujovi · Answer

D IMO.

Out of the various options given , only D seems to relate why this "particular contract" might not be as fruitful for BCC as envisaged by their executives and consultants. The factors mentioned in this point are typical of this contract i.e. for office setting. But I must admit the chain of reasoning is a bit shaky.

For eg if we take C , it is possible that all other contracts provide carpets to establishments with standard size but this will require extensive customization ( thus increased costs)

Similarly A denotes that it is possible that due to increased transportation costs , they might not be able to make profits.

But all said and done , only D indicates with certainty that wear and tear and thus cost will be higher.

KarishmaB · Answer

The plan is to earn a large profit. BCC executives and independent consultants feel that they will be able to earn the large profit. They would have obviously found out the amount of work to be done and the costs related to that work. For the plan to fail, we are looking for some exceptional reason that the executives and consultants may not have considered in calculating costs.

Options (A) and (C) would have already been considered while calculating costs.

Option (D) could be unexpected. If the carpet degrades and needs to be replaced often, it will make the costs shoot up. Hence the plan could fail.

Answer (D)

LighthousePrep · Answer

Hi simi200207,

Here's how I approached the question:

First I read the question stem: "Which of the following, if true, most calls in question the argument that BCC will make a large profit from this contract with Megalimpet?"

I see that the question is asking about profitability of BCC. Then I looked at the passage.

The first few sentences describe Megalimpet. Not the company we are considering here. We care about their vendor - BCC.

BCC placed their bid and claimed it was profitable based on "all delivery costs, all installation, and any ongoing maintenance and upkeep while the carpet is under the three-year warranty."

So now I go to the answer choices and use a process of elimination.

a) The passage says they already took into consideration "all delivery costs." Therefore they must have already known about this expense and still believed that the bid would be profitable.
b) Having supplied carpets to restaurants in the past does not mean that the bid would be any less profitable. If anything, it would strengthen the executives' conclusion because they are backed by experience.
c) The passage says they already took into consideration "all installation." Therefore they must have already known about this expense and still believed that the bid would be profitable.
d) This answer choice provides us with a NEW variable. It is possible that the executives and consultants had not previously done work for office spaces and therefore have not considered the impact of toner on maintenance costs. I keep this one and make sure there isn't a better option available.
e) This one is irrelevant. Some other company's bid does not impact BCC's profitability. Profitability is only impacted by revenue and expenses.

Correct answer D because all others are eliminated.

SaudKhan · Answer

Hi,

This seemed to be pretty straight forward. We have to find something that would harm BCC and cause losses. 
Clear answer would contain something that would increase the costs beared by BCC in the installation of carpets.
If BCC has to replace sections due to degradation that would be a burden on BCC and hence would rip off their profits. 
Clear D .

Gettinh Kudos might help 
Cheers

StellaSiqiYan · Answer

Hi,

I agree that the other options are incorrect, but I have a question regarding the validity of D). The passage mentions that the contract includes "any ongoing maintenance and upkeep while the carpet is under the three-year warranty." Doesn't this mean that BCC already considered the potential cost of replacement, and factored it into its calculations of the bid price. I guess these specific costs might be argued as "unexpected". But in this case, BCC (a business operating in this industry, and likely a pretty big company since it is able to bid on such a large contract) should be able to foresee/estimate that additional maintenance/replacement costs of carpet that " degrades rapidly  when it comes into contact with  standard toner,  found in  most laser printers and photocopiers ; the degraded sections are unsightly and smell bad, so they  often need to be replaced ." Is it wrong to think that BCC should have known about these costs? But then again, how can we assume that they didn't know, given the way option D) is currently phrased?

Could you please help me understand the point that I'm missing?

Thank you in advance.

Stella Siqi Yan

aragonn · Answer

Official Explanation 
From all the evidence given, it seems that BCC (and the independent consultants) have taken all costs into account, and the analysis reveals that they will reap a considerable profit. In order to call this into question, we have to come up with some major unanticipated cost that would not be something already considered in this analysis.

(D) is the credited answer. First of all, laser printers and photocopiers are very common devices in office spaces, so we good reason to think that many of Megalimpet's tenants will use these. If the toner degrades the carpet, that's a huge additional expense for BCC, because their contract includes "ongoing maintenance" --- i.e. replacing any carpet that needs replacing. Finally, nothing in the argument stem gives us any indication that this problem was on anybody's radar, so this well could be an unexpected or unanticipated expense for BCC. Therefore, it most calls into question the idea that BCC will make a huge profit.

(A) & (C) are all expenses that would have been very clear to BCC and to its independent consultants, and therefore all of these would have had to have been taken into account when the financial analysis of the bid was made. There is no reason any of these expenses would be unanticipated.

(B) speaks to BCC previous experience, which, if anything, would tend to suggest they know what they are talking about. If anything, this would tend to strengthen the argument, not weaken it.

(E) only compares BCC to the second lowest bid, but we have no idea about that company, what it did or did not take into account in their bid, and what their overall costs might be. There are too many unknowns for this piece of information, by itself, to have any substantial impact on the argument.

VerbalBot · Answer

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Megalimpet is a nationwide owner of office space. They have major off

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