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Difficulty:
25%
(medium)
Question Stats:
77% (01:27) correct
23%
(01:34)
wrong
based on 494
sessions
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Adam will spend $4,000 to rent a booth at the town’s annual county fair to promote his new Sandwich Shoppe. In previous years, the average food booth at the fair served 400 customers. Thus, in order to cover his costs, Adam has calculated that he must sell 400 sandwiches for $10 each.
Which of the following statements casts the most doubt on Adam’s chances of breaking even at the county fair?
A. Adam should not limit himself to 400 sandwiches; he should be prepared to sell more.
B. Adam has not factored in the costs of raw materials or labor in calculating the amount of revenue he needs to generate to break even.
C. If booths in previous years averaged 400 customers, that means some booths served more than 400 and some served fewer than 400.
D. Many people prefer other types of food to sandwiches.
E. If Adam shares his booth, and the cost of the rental, with a complementary business, he will not have to sell as many sandwiches to break even.
Which of the following statements casts the most doubt on Adam’s chances of breaking even at the county fair?
A. Adam should not limit himself to 400 sandwiches; he should be prepared to sell more.
B. Adam has not factored in the costs of raw materials or labor in calculating the amount of revenue he needs to generate to break even.
C. If booths in previous years averaged 400 customers, that means some booths served more than 400 and some served fewer than 400.
D. Many people prefer other types of food to sandwiches.
E. If Adam shares his booth, and the cost of the rental, with a complementary business, he will not have to sell as many sandwiches to break even.
01 May 2022, 11:15
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Bunuel
OFFICIAL EXPLANATION
Adam concludes that to cover the $4,000 cost of a booth at the fair, he will need to sell 400 sandwiches at $10 each. He relies on information about the number of customers served by the average booth in previous years. The question asks what most weakens Adam’s conclusion. The correct answer will either show that
Adam has overlooked other important costs, or that his logic is fundamentally flawed. There could be more than one choice that seems to suggest that Adam might not break even; the correct answer will be the one that eliminates any possibility that he will break even.
(A) Though this is certainly true in a practical sense, it does not show that Adam's plan will not work and that he will not stay within his budget. In fact, if he could sell more than 400 sandwiches, it is likely that this would help him break even.
(B) CORRECT. Each sandwich costs some amount of money to make and sell, so even if Adam sells the 400 sandwiches as planned, his net income will certainly be less than $4,000. Based on this statement, Adam definitely will not break even.
(C) Though it is true that an average number of customers means some booths served more and some served fewer, this statement does not tell us that Adam will have fewer than 400 or that his plan cannot work. Consider also that each customer might buy more than one sandwich, so Adam could have fewer customers but still sell enough sandwiches to cover his costs.
(D) Although some people will buy other types of food at the fair, this statement fails to conclusively weaken Adam’s logic. Adam relied on information about the average number of customers for food booths in previous years, but those booths may have sold sandwiches or other foods – we simply don’t have enough information to judge whether this statement strengthens or weakens Adam’s conclusion.
(E) Sharing the booth would actually make it more likely that Adam would break even. If he shares the cost of the booth rental, then he is more likely to sell enough sandwiches to cover his costs.
01 May 2022, 14:38
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Bunuel
The questions asks use to find why Adam wouldn't break even with his logic. First thing is the calculation used for the cost of the booth and the cost of revenue needed. The labor, and supplies to make a sandwich are not mentioned and would be a required piece to determine the breakeven revenue target.
A is in the arena of what we would expect to see but never touches the variables in determining a breakeven revenue value.
The only option that addresses the issue is B. Adam didn't include materials, labor, marketing, transport, etc to determine how much he should sell in order to break even on the booth.
