A retailer usually charges a flat rate of $10 for shipping on orders

Question

A retailer usually charges a flat rate of $10 for shipping on orders made through its website. However, to encourage larger purchases, the retailer offers free shipping on orders that exceed $50 in value. The value of an order is determined by the cost of the products purchased before any tax or potential shipping costs are added.

The statements above, if true, best support which of the following statements?

A. The retailer would make more money if it did not offer free shipping.
B. Any order of more than $50 after tax is added is not eligible for free shipping.
C. Some customers will not purchase items through the retailer's website unless they get free shipping.
D. A customer can spend less money overall by purchasing a greater number of items.
E. The amount of money the retailer earns through additional sales more than compensates for the additional shipping costs it incurs.

Raxit85 · Answer

A retailer usually charges a flat rate of $10 for shipping on orders made through its website. However, to encourage larger purchases, the retailer offers free shipping on orders that exceed $50 in value. The value of an order is determined by the cost of the products purchased before any tax or potential shipping costs are added.

The statements above, if true, best support which of the following statements?

A. The retailer would make more money if it did not offer free shipping. - May be if his sales volume is large and may not be if his sales volume is small. Incorrect.
B. Any order of more than $50 after tax is added is not eligible for free shipping. - May be true or may not be true
C. Some customers will not purchase items through the retailer's website unless they get free shipping. - Our of scope.
D. A customer can spend less money overall by purchasing a greater number of items. - Could be true
E. The amount of money the retailer earns through additional sales more than compensates for the additional shipping costs it incurs. - If sales volume is more than amount of money outweigh the cost of shipping.

Imo. E

Basim2016 · Answer

E is only viable profitable option, otherwise it will be a loss for the seller.
E is the winner 
Regards

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porwal1 · Answer

Based on the argument i find B as the most appropriate answer.

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Raxit85 · Answer

GMAT1393/ moderators,

Can anyone please post the OE?

Thanks
Raxit.

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Gunika16 · Answer

Hello  Raxit85 ,

Can you please explain how you eliminated B as the answer choice?

The question stimulus states that $50 before tax is eligible for free shipping (and B says $50 after taxes is not eligible for free shipping). While D says that purchasing more products = spending less money. What if a customer purchases 2 products worth $25 each while another purchases 5 products worth $10 each?

Can you please explain? Might help me understand better.

TaoOfGMAT · Answer

D is the only choice making reference that connects the objective of the seller and how customers will be motivated to realize that objective. 
Please pay attention to the question here.

Gunika16 · Answer

Hi TaoOfGMAT , I see the point now. Thanks for the explanation.

rocky620 · Answer

But I think that option E is also true.

More revenue will always compensate for the shipping cost. That's why the cap of $50 is put for a purchase to qualify for free shipping, which implies that the final profit generated after selling goods worth $50 is definitely more than $10, and so the shopkeeper is making money in the transaction.

Experts  nightblade354   gmat1393   GMATNinjaTwo  Please help

gmat1393 · Answer

KAPLAN OFFICIAL EXPLANATION

Identify the Question Type

The information provided will support the correct answer choice, making this an Inference question. The correct answer will be fully supported by the stimulus.

Untangle the Stimulus

The stimulus provides some facts. For orders placed on a retailer's website, shipping is usually $10 per order, but customers can get free shipping if they order more than $50 of merchandise (before tax and shipping costs are applied). Picking numbers can bring this into focus. If a customer places a $50 order, the cost with shipping is $50 + $10 = $60. But if a customer places a $51 order, the cost with shipping is just $51.

Predict the Answer

There are many possible inferences, so it's impossible to predict exactly what the correct answer will say. Just watch out for answers that use overly strong language or delve into concepts not explicitly mentioned. For example, the intention of the free shipping offer is to "encourage larger purchases," but that doesn't mean customers necessarily take advantage of it.

Evaluate the Choices

(D) is supported. For instance, a person buying $48 in products would pay $10 in shipping for a total of $58, but could actually spend less by adding a $4 item and paying $52 and no shipping. A customer may not choose to do this, but she definitely can, as this answer claims.

(A) is not supported. If the retailer didn't offer free shipping, it's possible people would just buy a lot less overall and profits would go down.

(B) is not supported. This would only apply to orders that are less than $50 before the tax is added. However, if a product was over $50 before tax, it will also be $50 after tax and thus eligible for free shipping.

(C) certainly seems plausible, but there's no support in the text for the idea that customers of this particular retailer will do that. Perhaps the retailer sells a hard-to-find product that people are willing to buy even with shipping costs.

(E) is not supported. This is only be true if people purchase enough extra products that profits on those products outweigh the $10 shipping per order. However, if people are buying only an extra $2 or $3 in products to get the free shipping, or if profit margins on products are very small, then the retailer may actually be losing money on the deal.

TAKEAWAY: Make sure that the correct answer to an Inference question is fully supported by the stimulus. A reasonable-sounding statement that is not supported by the text is incorrect.

arvind910619 · Answer

Imo B

OA is D though.

For me B looks solid.
Very tough question.

VerbalBot · Answer

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A retailer usually charges a flat rate of $10 for shipping on orders

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A retailer usually charges a flat rate of $10 for shipping on orders

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