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505-555 (Easy)|   Weaken|      
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Sajjad1994
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An analyst at a furniture company has noted that the company loses app 16 Apr 2019, 06:40
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E
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Difficulty:

15% (low)

Question Stats:

85% (01:35) correct 15% (01:43) wrong based on 213 sessions

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An analyst at a furniture company has noted that the company loses approximately $2 million per year on its money-back guarantee, which stipulates that the company will return the purchase price to any customer whose furniture breaks within the first year, regardless of the way in which the furniture was broken. The analyst argues that the company could increase its net revenues (total revenues minus total costs) if it abolished the money-back guarantee.

Which of the following, if true, provides the best reason for the company not to follow the analyst’s advice?

A. A study has shown that only 25 percent of the broken furniture claims that the company has honored in the last five years were due to manufacturing defects.

B. The $2 million that the company expends on the money-back guarantee represents only 4 percent of the company’s total costs.

C. A popular consumer magazine gave the furniture company its highest rating for overall quality of product.

D. The company’s largest competitor has a more restrictive money-back guarantee that covers only furniture broken due to manufacturing defects within six months of purchase.

E. Customers cite the money-back guarantee as the primary reason they buy furniture from this company.

Source: McGraw-Hill's GMAT
Difficulty Level: 550
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E
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An analyst at a furniture company has noted that the company loses app 16 Apr 2019, 08:02
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SajjadAhmad
An analyst at a furniture company has noted that the company loses approximately $2 million per year on its money-back guarantee, which stipulates that the company will return the purchase price to any customer whose furniture breaks within the first year, regardless of the way in which the furniture was broken. The analyst argues that the company could increase its net revenues (total revenues minus total costs) if it abolished the money-back guarantee.

Which of the following, if true, provides the best reason for the company not to follow the analyst’s advice?

A. A study has shown that only 25 percent of the broken furniture claims that the company has honored in the last five years were due to manufacturing defects.

B. The $2 million that the company expends on the money-back guarantee represents only 4 percent of the company’s total costs.

C. A popular consumer magazine gave the furniture company its highest rating for overall quality of product.

D. The company’s largest competitor has a more restrictive money-back guarantee that covers only furniture broken due to manufacturing defects within six months of purchase.

E. Customers cite the money-back guarantee as the primary reason they buy furniture from this company.

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IMHO (E) , for the highlighted errors in the other options.....
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An analyst at a furniture company has noted that the company loses app 16 Apr 2019, 12:00
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SajjadAhmad
An analyst at a furniture company has noted that the company loses approximately $2 million per year on its money-back guarantee, which stipulates that the company will return the purchase price to any customer whose furniture breaks within the first year, regardless of the way in which the furniture was broken. The analyst argues that the company could increase its net revenues (total revenues minus total costs) if it abolished the money-back guarantee.

Which of the following, if true, provides the best reason for the company not to follow the analyst’s advice?

A. A study has shown that only 25 percent of the broken furniture claims that the company has honored in the last five years were due to manufacturing defects. wrong - even if only 25%, it still represents additional revenue that can be netted

B. The $2 million that the company expends on the money-back guarantee represents only 4 percent of the company’s total costs. wrong - even if its only 4% of revenue, it is still money that can be netted.

C. A popular consumer magazine gave the furniture company its highest rating for overall quality of product. wrong - does not describe concrete link to how it can increase revenue. stronger option exists

D. The company’s largest competitor has a more restrictive money-back guarantee that covers only furniture broken due to manufacturing defects within six months of purchase. wrong - does not establish connection as to how it can impact the company in question.

E. Customers cite the money-back guarantee as the primary reason they buy furniture from this company. correct - it offers an explanation as to how removing the money-back guarantee can impact the revenue negatively.

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Correct answer should be "E". Reasons listed above.
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An analyst at a furniture company has noted that the company loses app 18 Apr 2019, 06:23
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IMO E is correct,
if the company agrees to the analyst’s advice, then most of the customer will go to some other furniture store as the customer is purchasing the furniture solely because he/she is getting guaranty for 1 year from the company.
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