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# V03 #13

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Intern
Joined: 03 Jul 2009
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V03 #13 [#permalink]

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29 May 2010, 12:02
The cost of gas-burning grills has dropped nearly 40% in the last year, prompting an increase in sales. Hank’s Hardware responded to the popularity of gas grills with large displays and deeply-discounted sale prices. Sales of gas grills at Hank’s Hardware went up by a third, but at the end of the quarter managers were shocked to find they had lost money on gas grills.

Which of the following, if true, is the best explanation for why Hank’s Hardware’s profits on gas grills are suffering?

(a) Sales volume has been miscalculated, surprising managers with a loss in profits.
(b) The further discounts offered by sale prices account for a larger dollar amount than the increase in sales, leading to a loss of profits.
(c) The reduction in cost is caused by shoddy construction, which is why many people who purchased gas grills are returning them, leading to a loss in profits.
(d) Wood-burning grills are more popular than gas-grills; since Hank’s carries mostly gas grills, their profits are suffering
(e) Customers only bought gas grills when they were on sale; once the sale was over, they stopped buying the grills, leading to a loss in profits.

OA (b)
maybe i'm missing something here, but (b) can't explain why the store is losing money (there's a difference between losing money, as in the situation discribed in the pasage, and decreased profits, which (b) suggests)
the only answer that can explain loosing money is (c) but it's a bit lame

maybe "they had lost money on gas grills" should be rephrased to "their profits declined"?

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CEO
Joined: 15 Aug 2003
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Re: V03 #13 [#permalink]

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06 Jun 2010, 11:43
hi,

I think your observation is mostly a nuance. Lost money on gas grills means loss in profits. What else would losing money mean?

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Intern
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Re: V03 #13 [#permalink]

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06 Jun 2010, 12:13
right, right, right
too tired, sorry

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Re: V03 #13   [#permalink] 06 Jun 2010, 12:13
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# V03 #13

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