The value of a company’s inventory is found by subtracting the total..

Question

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?

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.

SuyashA · Answer

Why can't you share the answer now?

According to me, the answer to this question is option D.

Value (Inventory) = Value (Units produced) - Value (Units sold) (i.e say I = P - S)

Since it is given that I increased and P remained the same, then S should decrease
This scenario will happen if the sale price is reduced, decreasing S.

surbhi1991 · Answer

Hi

It can be C too, as the units produced can increase too.

medic19 · Answer

Don't think you are right there. Let X be the number produced, C the cost per item; and S the number sold and P of price per item.

Inv. = ($-value produced = X*C) - ($-value sold = S*P)

Y1   Y2 
S = S
XC = XC
Inv<Inv

The only other variables is price sold (though which year is unknown). Luckily only one answer deals with this.

Pre-empting the answer helps a lot.

surbhi1991 · Answer

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.

Why can't you share the answer now?

According to me, the answer to this question is option D.
Value (Inventory) = Value (Units produced) - Value (Units sold) (i.e say I = P - S)

Since it is given that I increased and P remained the same, then S should decrease
This scenario will happen if the sale price is reduced, decreasing S.

Hi

It can be C too, as the units produced can increase too.

Don't think you are right there. Let X be the number produced, C the cost per item; and S the number sold and P of price per item.

Inv. = ($-value produced = X*C) - ($-value sold = S*P)

Y1   Y2 
S = S
XC = XC
Inv<Inv

The only other variables is price sold (though which year is unknown). Luckily only one answer deals with this.

Pre-empting the answer helps a lot.

Oh my bad. i assumed it dollar per unit instead of whole production cost.

Doer01 · Answer

Hi Folks,
 Company value = Total dollar value of units produced(P) - Total dollar value of units sold(S)
Company has sold same NUMBER of units this year as last. Dollar value of units produced has stayed constant (P). Value has increased. This could happen only if S decreases.
 
A) Acme started selling a new model of ball bearing this year.: This is a new information and we cannot use it because "The statements above, if true," has restricted the scope to the information presented. Incorrect

B) Acme’s shipping costs rose this year over last year. : Same as A, Incorrect

C) Acme produced more ball bearings this year than last year. Even if they did, the total dollar value has stayed the same and thats the only contributing factor in deciding company value. Incorrect

D) Acme lowered the sale price of its ball bearings this year. This is tempting as it talks about sale price which could affect total dollar value of units sold, a conytributing factor in calculating company value. Lower sale price will lead to lower amount of total dollar value of units sold.Hence lower company value. Correct.

E) Acme’s competition sold more ball bearings this year than did Acme. Again, not a contributing factor in calculating company value. Incorrect.

D it is.

gmat1393 · Answer

KAPLAN OFFICIAL EXPLANATION

Identify 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.

Crytiocanalyst · Answer

A) Acme started selling a new model of ball bearing this year.
We cannot determine how the new model fairs and it's profitability therefore out

B) Acme’s shipping costs rose this year over last year.
This even though helps however we are not in a position to determine whether Acme conducts shipping

C) Acme produced more ball bearings this year than last year.
it's discussed in the passage that same no of ball bearings were produced

D) Acme lowered the sale price of its ball bearings this year.
This definitely helps since same units were produced and sold only the price decrease will help the cause

E) Acme’s competition sold more ball bearings this year than did Acme.
This is thoroughly of context because we are not concerned about what other companies do

Therefore IMO D

VerbalBot · Answer

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