Denoma's revenue

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uptowngirl92
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PostSat Nov 07, 2009 8:11 pm Reply with quote
FYI: for future ref: this is a GPREP QUESTION.
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Testluv
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PostSat Nov 07, 2009 9:14 pm Reply with quote
uptowngirl92 wrote:
FYI: for future ref: this is a GPREP QUESTION.
And here's how we would attack it:


In a paradox question, you should have the answers to two questions very clear in your head before you go to the answer choices:

1) What is the paradox (ie, surprise)?

2) Why is it paradoxical (ie, surprising)?

Remember, a paradox is just: something unexpected happened (surprise!) Always search for a keyword that will help you find the surprise, usually: but, yet, although, or in this case surprising

The surprise is: Denoma’s sales fell BUT sales from their Denoma cars increased

It is surprising because: if their sales fell, you would expect the opposite.

Now, when we go to the answer choices, we only ask one question to ourselves: Would this make the surprise make sense? Know that many wrong answers will be outside the scope or else be 180s (they will actually make the surprise more surprising not less).

Scanning for a choice that will be logically capable of resolving the surprise:

A. Because of the need to educate the public about its new models' capabilities, Denoma's advertising spending was higher than normal over the period.
High ad spending would not explain why sales went down. Next.
Choice B is clearly outside the scope.

C A significant proportion of Denoma's revenue comes from making components for other consumer-electronics manufacturers.

So a huge chunk of their sales comes from components to other manufacturers rather than selling cars directly to people. So even though they are selling a lot of cars to people, this fact introduces a salient explanation for why their overall sales went down at the same time: the company’s bread and butter is selling parts not cars. What if parts sales went way down? That would definitely be capable of resolving our surprise.
Choose C
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Last edited by Testluv on Sat Nov 07, 2009 10:58 pm; edited 2 times in total
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gmatmachoman
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PostSat Nov 07, 2009 10:54 pm Reply with quote
IMO E wont fit here.
Because, doing so will crtainly affect the revenues of the retailers not The Denoma's.

Whereas C is able to remove the entanglement clearly.
It says D's major chunk of revenues comes from making components to other Manufacturers.

Quote:
IMO C, even though the sales grew, they are not the only variable responsible for Denoma`s revenues. If the other participants` revenues decreased and Denoma acts as a 3rd party, the revenues from this service will decrease, hence the Denoma`s results wont be as good as they would if it only considered the sales of its own products

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raghavakumar85
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PostSun Nov 08, 2009 2:31 am Reply with quote
E loses on very simple points.

1. If the retailers are selling old models of Denomo that too with heavy discounts, their sales revenues cannot increase substantially for Denomo products. Also if they are thanking Denomo for its quality and innovative products, they need not discount those products to sell them. (Basic consumer feeling: discounted products may not be of 100% quality)

2. Even in the worst scenario, loss for retailers cannot be implied to loss for Denomo since they have distributed their products to retailers long back and it is basic economics that retailers selling products for discounts will not effect the manufacturers.
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gmatmachoman
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PostSun Nov 08, 2009 6:31 am Reply with quote
raghavakumar85 wrote:
E loses on very simple points.

1. If the retailers are selling old models of Denomo that too with heavy discounts, their sales revenues cannot increase substantially for Denomo products. Also if they are thanking Denomo for its quality and innovative products, they need not discount those products to sell them. (Basic consumer feeling: discounted products may not be of 100% quality)

2. Even in the worst scenario, loss for retailers cannot be implied to loss for Denomo since they have distributed their products to retailers long back and it is basic economics that retailers selling products for discounts will not effect the manufacturers.
I agree with u Raghav!
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