Looking to increase profits during a prolonged period of stagnated

Question

Looking to increase profits during a prolonged period of stagnated sales, the largest garment manufacturer in Britain has downsized the production staff of its factories. Although this strategy is inconsistent with the normal relationship between manpower and productivity, the manufacturer is confident that it will succeed.

The manufacturers' plan to increase profit margins relies on which of the following assumptions?

A. Garment manufacturers, out of necessity, reduce production staff whenever they do not have any new products to make. 
B. The smaller garment manufacturers will continue taking away a large percentage of the largest manufacturer’s business.
C. Lower prices and more durable materials will attract many price-conscious consumers. 
D. It will not be overly expensive for the manufacturer to install new factory safety regulations that will soon become mandatory for the garment industry.
E. The expenses saved by reducing the production staff will more than compensate for any decline in profit caused by lowered productivity.

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vasu1104 · Answer

there is prolonged period of stagnated sales and now this manufacturer wants to increase his profit. for that they are downsizing their production staff of its factories.
this strategy is inconsistent with normal relationship between manpower and productivity.
but manufacturer is confident that it will work.

here, there is long period of stagnated sales and he wants to increase profit by reducing staff. since the revenue is stagnated, he wants to make sure that expense doesnt go up any further or make sure he can reduce expense as much as he can. so he is thinking that if i reduce the expense despite having stagnated revenue, i can still generate profit for the factory.

A. Garment manufacturers, out of necessity, reduce production staff whenever they do not have any new products to make.
but we dont have any idea whether this is the time where they dont need new products. what we only know is that they have stagnated sales. this has no impact though. out.

B. The smaller garment manufacturers will continue taking away a large percentage of the largest manufacturer’s business.
this is complete irrelevant to argument here. not concerned with how competitions are going to take away their business. out.

C. Lower prices and more durable materials will attract many price-conscious consumers.
please do that and save your employees from getting laid off. reject.
 
D. It will not be overly expensive for the manufacturer to install new factory safety regulations that will soon become mandatory for the garment industry.
good to know but initially their profit still take a dent for intital capex involved in the process. this doesnt help much. out.

E. The expenses saved by reducing the production staff will more than compensate for any decline in profit caused by lowered productivity.
yeah. if the expense wont be more after downsizing then whole plan has no merit in it. so they must be assuming that we can save lot of money and get ourselves some profit even in stagnated sales. so this helps.

Adit_ · Answer

The manufacturer feels the plan will succeed because of the possible belief that his profits will outweigh the loss in production.
 Option E  states this exact assumption that is required for the argument to hold.

WiziusCareers1 · Answer

1. Deconstructing the Argument 
To find the assumption, we first need to break the manufacturer's logic into its core components:

The Problem:  Sales are stagnant (they aren't growing).
 The Action:  Downsizing production staff (cutting the workforce).
 The Conflict:  Usually, fewer workers mean lower productivity (making fewer goods).
 The Goal:  Increase total profit.

The Logical Gap 
If the manufacturer makes fewer items (lower productivity) but wants to make more profit, they are betting that the money they save on salaries is greater than the money they lose from selling fewer clothes.

2. Evaluating the Options 
A. Necessity of staff reduction for new products
 Incorrect.  The prompt says the goal is to "increase profits" during "stagnated sales," not that they ran out of things to make. This choice doesn't explain how the manufacturer plans to remain profitable despite lower productivity.

B. Competition from smaller manufacturers
 Incorrect.  If smaller manufacturers keep stealing business, the large manufacturer’s sales would likely continue to drop. This would hurt profits, not help them. This choice actually weakens the manufacturer’s confidence.

C. Lower prices and durable materials
 Incorrect.  While this sounds like a good business move, the prompt doesn't mention prices or material quality. An assumption must connect the specific actions mentioned (downsizing) to the goal (profit).

D. New factory safety regulations
 Incorrect.  This is "outside information." The cost of future regulations is irrelevant to whether downsizing staff today will increase profit margins in the face of lower productivity.

E. Savings vs. Productivity Loss
Correct. This is the "bridge" that makes the plan work.

The Logic:  If I fire 100 people, I save $5 million in wages.
 The Risk:  Because I fired them, I produce less and lose $2 million in sales.
 The Result:  I am still "up" by $3 million.
For the manufacturer to be "confident" in this plan, they must assume that the cost-cutting (savings) outweighs the loss in output.

3. The "Negation Test" 
A great way to check your answer on assumption questions is to negate it (turn it into the opposite). If the negated version destroys the argument, it is the correct assumption.
 Negated E:  The expenses saved by reducing staff will NOT compensate for the decline in profit caused by lowered productivity.
If the savings don't cover the losses, the plan to increase profits is guaranteed to fail. Since the negation breaks the argument, E is the essential assumption.

postAlone · Answer

The correct answer is  E .

The Logic
To increase profit while sales are flat and productivity is dropping, the manufacturer must save more money than they lose.
 
  The Goal:  Profit up 
  The Action:  Staff down (which leads to Production down) 
  The Assumption:  The money saved on wages must be greater than the revenue lost from making fewer goods.  
Why E is Correct
If the savings from layoffs do  not  cover the loss in productivity, the plan fails. This makes  E  the essential "bridge" for the manufacturer's confidence.

Why Others Fail
 
  A & B:  Address why they  might  downsize, but not how it leads to  profit  during a slump. 
  C:  Introduces a new strategy (materials/pricing) not mentioned in the text. 
  D:  Focuses on future costs that don't explain the current strategy's logic.

BongBideshini · Answer

A. Garment manufacturers, out of necessity, reduce production staff whenever they do not have any new products to make.
>  Doesn’t address whether this increases profits here 
 
B. The smaller garment manufacturers will continue taking away a large percentage of the largest manufacturer’s business.
>  This would hurt profits, not support the plan. 
 
C. Lower prices and more durable materials will attract many price-conscious consumers.
>  Not part of the strategy (they’re cutting staff, not changing product/pricing). 
 
D. It will not be overly expensive for the manufacturer to install new factory safety regulations that will soon become mandatory for the garment industry.
>  Irrelevant to whether staff cuts increase profit

E. The expenses saved by reducing the production staff will more than compensate for any decline in profit caused by lowered productivity. 
 > This is exactly what must be true for profits to increase. 
If we negate the choice, we can not say that the plan will be successul to increase profits.
 Ans E

ExpertsGlobal5 · Answer

E is the best choice.

Video explanation:

https://www.youtube.com/watch?v=k4I6Kd98Hxc

Looking to increase profits during a prolonged period of stagnated

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