Expense report memo from SuperStudios Purchasing Dept. You requested

Question

Expense report memo from SuperStudios Purchasing Dept.

You requested information on our purchases from ComplexCamera in the past 6 months. Summarized below.

Date: Jan 10, 2010

Item / Quantity: LSX-300 / 10

Item / Quantity: Horizon 110 / 12

Total Cost: $21,500

Date: June 17, 2010

Item / Quantity: LSX-300 / 5

Item / Quantity: Horizon 110 / 14

Total Cost: $17,750

ktzsikka · Answer

Q1a) In a saturated market, products with comparable technological features and of the same quality will have prices which vary greatly.
A1a)  NO . Price will not vary if technological features are similar/comparable. Refer Tab2: Notes (According to its research and that of classical .... similar in terms of quality and technological features to competitor products... prices must meet or beat competitor prices.)

Q1b) The company should try to differentiate its product by emphasizing its unique features in order to increase market share.
A1b)  YES . With unique features, the company can keep higher prices (and higher revenue) but no direct relation between higher prices and larger market share can be inferred. Refer Director's note : "our state-of-the-art technology has not been effectively replicated anywhere in the world, and our company has consistently received high ratings in customer service, so a price reduction is not defensible."

Q1c) Consumers who believe the features of two different products to be comparable will believe that the higher-cost LSX-300 is better in quality.
A1c)  NO.  As per the note, "customers perceive our LSX-300's to be similar in terms of quality and technological features to competitor products, our prices must meet or beat competitor prices", customers are aware that the quality of LSX-300 is similar to its competitors. And 
From the info given in Tab1, we find that price of LSX-300 ($1100) is already higher than its competitor ($875). And from Tab2, we know that the customers are already aware that the quality of LSX-300 is similar to its competitors.  ("customers perceive our LSX-300's to be similar in terms of quality and technological features to competitor products...") 
Still, sales of LSX-300 has drastically declined from Jan to Jun,2010. Hence, this statement cannot be inferred.

Q2a) Market share percentage data for the years 1990 through 2005 is a linear function with a positive slope.
A2a)  FALSE.  Few of the values are equal and and we observe that change from 2004 to 2005 (40 to 38) is negative.

Q2b) The line of best fit for sales data for the years 1990 through 2005 is a linear function with a positive slope.
A2b)  TRUE . Line of best fit will be a line (linear) with positive slope as sales figure are increasing throughout the given time span.

Q2c) The slope of the function representing retail price from 2001 through 2005 is zero.
A2c)  TRUE . As values remain constant from 2001 thru 2005 - slope is zero.

yashikaaggarwal · Answer

Question 1.
1. Yes
2. No
3. No

Question 2.
1. No
2. Yes
3. Yes

Explanation is in the picture

Posted from my mobile device

Sajjad1994 · Answer

This is a tricky question, OA has been posted in the question.

Question #1

No, Yes, and No

Question #2

False, True, and True.

ktzsikka  and  yashikaaggarwal  both of you got question 1 incorrect, for question #2 I suppose your No means False and Yes means True. If this is the case your second question is correct. I will post OE shortly.

Thank you

Sajjad1994 · Answer

Official Explanation

1. Consider the statements below. Can each statement be inferred from the information given?

In a saturated market, products with comparable technological features and of the same quality will have prices which vary greatly.

According to what the note states about classical economics, retailers will meet or beat competitors' prices if consumers don't see a difference in quality, so the prices should be roughly the same. Therefore, the answer is no, this inference is not supported.

Answer: No

The company should try to differentiate its product by emphasizing its unique features in order to increase market share.

According to the marketing department and classical economists, customers who believe the LSX-300 is of the same quality as competitors' products will not pay the higher price for it. The company has to either lower prices or differentiate its product. Since the president says that a reduction in price is not reasonable, the only way to increase market share is to change customer perception and make them think that the LSX-300 is superior. So yes, this inference is supported.

Answer: Yes

Consumers who believe the features of two different products to be comparable will believe that the higher-cost LSX-300 is better in quality.

Consumers who believe two products are comparable don’t have any reason to believe that the LSX-300 is better in quality because it is more expensive. So no, this inference is not supported.

Answer: No

2. Consider the statements below. Indicate whether each statement is true or false based on the president's note and the accompanying table.

Market share percentage data for the years 1990 through 2005 is a linear function with a positive slope.

Market share percentage increases every year from 1990 through 2001, but then it decreases after that, so the graph of this data would not be linear and would not have a constant positive slope. Therefore, this statement is false.

Answer: False

The line of best fit for sales data for the years 1990 through 2005 is a linear function with a positive slope.

Sales data keeps increasing steadily so the line of best fit for this data would have a positive slope. This statement is true.

Answer: True

The slope of the function representing retail price from 2001 through 2005 is zero.

Retail price stays the same from 2001 through 2005, which means a line graphed to represent this data during those years would have a slope of zero. This statement is true.

Answer: True

KHannigan · Answer

Question design is flawed

1b.

The note provides evidence that:

"  quality and technological features ..   prices  "

However this does not imply that increasing customer awareness of better technological features will lead to increasing market share at current prices.

Ironically this could fit well in a "Find the Assumption" question! It relies on many assumption including:
 
 The marketing campaign will be successful in reaching customers 
 Customers reached by the campaign will not be those who would otherwise already have bought an LSX-300 when shopping for a camera. 
 No customers will be deterred from buying the camera due to an increased perception that it is a more complex device.

2b.

There is nothing in the data to suggest that the fit would be linear. In fact, while this is far beyond the scope of a GMAT test, if you compute a linear regression and an exponential regression over the data, you will find that the linear fit is actually  WORSE  than an exponential fit.

Linear fit R2: 0.941
Exponential fit R2:  0.945

Question is malformed.

kartickdey · Answer

For 2.2  the data does not indicate that  The line of best fit for sales data for the years 1990 through 2005 is a linear function. the values are quite random and does not indicate any linear slope

Expense report memo from SuperStudios Purchasing Dept. You requested

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True	False
		Market share percentage data for the years 1990 through 2005 is a linear function with a positive slope.
		The line of best fit for sales data for the years 1990 through 2005 is a linear function with a positive slope.
		The slope of the function representing retail price from 2001 through 2005 is zero.