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# Which of the following logically completes the passage below

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Joined: 28 May 2012
Posts: 135

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Location: India
Concentration: General Management, Strategy
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WE: Information Technology (Retail)
Which of the following logically completes the passage below [#permalink]

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19 Nov 2012, 23:39
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74% (01:12) correct 26% (01:40) wrong based on 298 sessions

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Which of the following logically completes the passage below ?

One name-brand cereal manufacturer is about to reduce wholesale prices for its cereals by 20% because consumers have been switching from its cereals to cheaper store brands. The success of this strategy relies on the assumption that supermarkets will pass on all of the savings by lowering the prices they charge consumers for the manufacturers' cereals. Although supermarkets usually pass on such savings, in this case it is likely that supermarkets will not do so because ............................................................

a) Several other name-brand cereal manufacturers are about to reduce the wholesale prices of their cereals
b) the average price per box of name-band cereals has significantly increases over the past 10 years.
c) total annual sales of cereal - including both name-brand and store-brand cereals -have increased over the past 10 years.
d) supermarkets currently make far more profit on sales of store-brand cereals than on sales of name-brand cereals
e) the current prices of manufacturers' cereals are comparable to the prices of name-brand cereals produced by other cereal manufacturers.

Thanks
[Reveal] Spoiler: OA

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Re: One name-brand cereal manufacturer : GMAT PREP [#permalink]

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20 Nov 2012, 01:59
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a) Several other name-brand cereal manufacturers are about to reduce the wholesale prices of their cereals: Incorrect. Even if other brand name manufacturers reduce the price, there is no reason why store cannot pass the saving.
b) the average price per box of name-band cereals has significantly increases over the past 10 years: Incorrect. This will impact the manufacturer not the stores. So, irrelevant.
c) total annual sales of cereal - including both name-brand and store-brand cereals -have increased over the past 10 years: Incorrect. Even if the sales increased, there is no reason why store cannot pass the saving.
d) supermarkets currently make far more profit on sales of store-brand cereals than on sales of name-brand cereals: Correct. If the store is earning more profit on sales of their brand why will they want to lose sale and earn less profit.
e) the current prices of manufacturers' cereals are comparable to the prices of name-brand cereals produced by other cereal manufacturers: Incorrect. Comparison of brand to other brand is irrelevant, let's keep it to manufacturers' brand vs stores' brand. Irrelevant.

Kudos [?]: 267 [3], given: 31

Joined: 28 May 2012
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Kudos [?]: 72 [1], given: 11

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Re: One name-brand cereal manufacturer : GMAT PREP [#permalink]

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20 Nov 2012, 02:05
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Vineetk wrote:
a) Several other name-brand cereal manufacturers are about to reduce the wholesale prices of their cereals: Incorrect. Even if other brand name manufacturers reduce the price, there is no reason why store cannot pass the saving.
b) the average price per box of name-band cereals has significantly increases over the past 10 years: Incorrect. This will impact the manufacturer not the stores. So, irrelevant.
c) total annual sales of cereal - including both name-brand and store-brand cereals -have increased over the past 10 years: Incorrect. Even if the sales increased, there is no reason why store cannot pass the saving.
d) supermarkets currently make far more profit on sales of store-brand cereals than on sales of name-brand cereals: Correct. If the store is earning more profit on sales of their brand why will they want to lose sale and earn less profit.
e) the current prices of manufacturers' cereals are comparable to the prices of name-brand cereals produced by other cereal manufacturers: Incorrect. Comparison of brand to other brand is irrelevant, let's keep it to manufacturers' brand vs stores' brand. Irrelevant.

Can you explain what it exactly means when it says "pass on the savings to consumers" ? That is what is actually confusing me.
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Re: One name-brand cereal manufacturer : GMAT PREP [#permalink]

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20 Nov 2012, 02:21
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ankit0411 wrote:
Vineetk wrote:
a) Several other name-brand cereal manufacturers are about to reduce the wholesale prices of their cereals: Incorrect. Even if other brand name manufacturers reduce the price, there is no reason why store cannot pass the saving.
b) the average price per box of name-band cereals has significantly increases over the past 10 years: Incorrect. This will impact the manufacturer not the stores. So, irrelevant.
c) total annual sales of cereal - including both name-brand and store-brand cereals -have increased over the past 10 years: Incorrect. Even if the sales increased, there is no reason why store cannot pass the saving.
d) supermarkets currently make far more profit on sales of store-brand cereals than on sales of name-brand cereals: Correct. If the store is earning more profit on sales of their brand why will they want to lose sale and earn less profit.
e) the current prices of manufacturers' cereals are comparable to the prices of name-brand cereals produced by other cereal manufacturers: Incorrect. Comparison of brand to other brand is irrelevant, let's keep it to manufacturers' brand vs stores' brand. Irrelevant.

Can you explain what it exactly means when it says "pass on the savings to consumers" ? That is what is actually confusing me.

This means that whenever store receives any discounts from manufacturer, it passes it to the customer but in this case it will not. The manufacturer is not reducing the price on MRP but on wholesale prices. While store is now getting the product at 20% lower price, it will not give discount to the customer (i.e. will still sell at MRP).

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Re: One name-brand cereal manufacturer : GMAT PREP [#permalink]

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20 Nov 2012, 03:54
Vineetk wrote:
ankit0411 wrote:
Vineetk wrote:
a) Several other name-brand cereal manufacturers are about to reduce the wholesale prices of their cereals: Incorrect. Even if other brand name manufacturers reduce the price, there is no reason why store cannot pass the saving.
b) the average price per box of name-band cereals has significantly increases over the past 10 years: Incorrect. This will impact the manufacturer not the stores. So, irrelevant.
c) total annual sales of cereal - including both name-brand and store-brand cereals -have increased over the past 10 years: Incorrect. Even if the sales increased, there is no reason why store cannot pass the saving.
d) supermarkets currently make far more profit on sales of store-brand cereals than on sales of name-brand cereals: Correct. If the store is earning more profit on sales of their brand why will they want to lose sale and earn less profit.
e) the current prices of manufacturers' cereals are comparable to the prices of name-brand cereals produced by other cereal manufacturers: Incorrect. Comparison of brand to other brand is irrelevant, let's keep it to manufacturers' brand vs stores' brand. Irrelevant.

Can you explain what it exactly means when it says "pass on the savings to consumers" ? That is what is actually confusing me.

This means that whenever store receives any discounts from manufacturer, it passes it to the customer but in this case it will not. The manufacturer is not reducing the price on MRP but on wholesale prices. While store is now getting the product at 20% lower price, it will not give discount to the customer (i.e. will still sell at MRP).

That totally makes sense now ! all other options look irrelevant after re-reading the question carefully.

Thanks,
Ankit
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Re: One name-brand cereal manufacturer : GMAT PREP [#permalink]

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20 Nov 2012, 19:01
I got D after 1'47'' after eliminating A, B, C, E which are irrelevant.
In such time, I am not sure whether D is right or not.

Kudos [?]: 12 [0], given: 3

Joined: 28 May 2012
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Re: One name-brand cereal manufacturer : GMAT PREP [#permalink]

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21 Nov 2012, 08:34
I got D after 1'47'' after eliminating A, B, C, E which are irrelevant.
In such time, I am not sure whether D is right or not.

The answer is D- If super markets are making profits on store brand cereals why would they want the sales of one-brand cereal to increase ( that is by passing the savings to the customer ) . This would definitely reduce profit on their own brand right ?
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Re: Which of the following logically completes the passage below [#permalink]

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29 Jul 2014, 03:59
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Re: Which of the following logically completes the passage below [#permalink]

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16 Sep 2014, 07:32
Really very Good Question.
My first answer was E, After rereading and from above posts understood the meaning of the argument.
Understand this ... will pass on all of the savings by lowering the prices they charge consumers for the manufacturers' cereals. Although supermarkets usually pass on such savings, in this case it is likely that supermarkets will not do so because ..............Is Imp!

1, Brand Cereal thought if i reduce 20% Discount then may will have more sales.
2, Thought the Supermarket will sale at discount price.
3, Now the supermarket take an adv of it sales the MRP rate and sales the store brand in cheaper.
So the Supermarket get more profits on Selling more store brand than brand.
So D.

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Re: Which of the following logically completes the passage below [#permalink]

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11 Feb 2016, 18:31
Hello from the GMAT Club VerbalBot!

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Re: Which of the following logically completes the passage below   [#permalink] 11 Feb 2016, 18:31
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