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Denoma's revenue

by lilu » Thu Apr 09, 2009 9:32 pm
Denoma, a major consumer-electronics maker, had a sizeable decline in sales revenue for its most recent fiscal year. This result appears surprising, because electronics retailers report that although their overall sales were considerably lower than in the previous year, their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced.

Which of the following, if true, does most to explain the apparently surprising result?

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.
B. For the period at issue, Denoma's major competitors reported declines in revenue that were, in percentage terms, greater than Denoma's.
C. A significant proportion of Denoma's revenue comes from making components for other consumer-electronics manufacturers.
D. Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.
E. During the period, consumer-electronics retailers sold remaining units of Denoma's superseded models at prices that were deeply discounted from those models' original prices.

OA is C
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by gmat740 » Thu Apr 09, 2009 10:09 pm
Case I:
Denoma (D) ==> sales revenue reduced

Case II:

Retailers say the sales revenue of the D- Models have increased!!

we have to go for that option, in which both the conditions exist, but we can provide an alternate explanation for one of the phenomenon provided, the existance of the other case remains

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.

we are talking about sales revenue

so reject this one
B. For the period at issue, Denoma's major competitors reported declines in revenue that were, in percentage terms, greater than Denoma's
so what??
does this address the retailer's case?

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

So even if there is an increase in sales revenue from the retail, D-company is not able to increase its sales revenue because it's major part of revenue comes from making components for other consumer-electronics mfg's

so they must not be buying D-company's products,so D-is losing revenue




rest of the options are as bad as they can be

let me know if you have other doubts in this

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by mbadrew » Fri Apr 10, 2009 4:04 pm
Karan,

please elaborate. Break it down for us. Is the question asking for an assumption or an inference? If it's an assumption than C is the answer, but if it's asking for an inferece then E seems like the correct answer. What are the distinguishing characters?

thanks
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by kirvar » Fri Apr 10, 2009 7:12 pm
E cannot be right answer because it's retailers who sold the models at deep discounts and not Donema.

C is the only statement that can reconcile the paradox by giving an alternative and removing the emphasis from sales of new/old models
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by gmat740 » Fri Apr 10, 2009 7:50 pm
please elaborate. Break it down for us. Is the question asking for an assumption or an inference?
Inference is something which proceeds the argument

eg: Argument==> Karan is a topper in his class.And toppers are good leaders

Inference==> karan is a good leader!!

Assumption is something which is unstated, but for the argument to be true,the assumption must have to be true.

C is the only statement that can reconcile the paradox by giving an alternative and removing the emphasis from sales of new/old models

This is the what we have to do

We have to resolve the paradox

where both situation exist and we can provide an alternate explanation as to why two contradicting situations can exists simultaneously!!
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by mbadrew » Sat Apr 11, 2009 9:42 am
Kirvar & Karan,

thanks for the clarification guys.


Andrew
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by maihuna » Wed Jul 22, 2009 4:56 am
Hi,
ME AND AJ discussed it offline. More than the answer and explanation I am more interested in source of this quetion? Was it an official question.

I choosed E and reason is it is at least showing one reason why even if retailer are getting increased revenue D is not able to have increased revenue, retailers are selling old model...

If the source is not OG/Gmatprep I would like to treat this question as an garbage, if its an OG/Gmatprep I would like if some one can share the OE..
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by pandeyvineet24 » Wed Jul 22, 2009 10:00 am
I picked A. will not the cost of advertisement offset the revenue sales ?
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by shibal » Wed Jul 22, 2009 10:08 am
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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by Musicolo » Wed Jul 22, 2009 10:31 am
Both A and E sound better then C. Whatever source this is from and whatever you guys say, C seems totally irrelevant, out of scope or assuming too many things. Maybe its mistake if its from Kaplan. Kaplan is full of mistakes.
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by mehravikas » Wed Jul 22, 2009 1:29 pm
It should be E...because the argument says:

electronics retailers report that although their overall sales were considerably lower than in the previous year, their sales revenue from Denoma models actually grew
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by bignasty666 » Fri Jul 24, 2009 1:36 am
just merelt agreeing with the OA will not do the job. C is clearly wrong. Even if the company's part of revenue does come from supplying to other manufacturers HOW DOES IT EXPLAIN THE DECLINE IN THE REVENUE?? HAS IT BEEN STATED THAT THE COMPANY'S SALES TO THESE "OTHER MANUFACTURERS" DECLINED? if this was stated then C would have been an answer.

E is a better choice since it states that the retailers sold the new models of products at a discounted rate and hence achieved good sales. This was the reason why the manfacturers revenue declined..

In any case messed up question.
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by pranav » Fri Jul 24, 2009 5:51 am
E states that retailers sold old models of Denoma.
While the question stem states that the revenue of retailers were due to some innovative and popular models that Denoma introduced.
Hence E cannt be the correct answer.

A states that advertising expense was more. This will affect the profit margins and not sales revenue.

So, by POE, only C explains the decline in sales revenue
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by doclkk » Fri Jul 24, 2009 8:36 am
Musicolo wrote:Both A and E sound better then C. Whatever source this is from and whatever you guys say, C seems totally irrelevant, out of scope or assuming too many things. Maybe its mistake if its from Kaplan. Kaplan is full of mistakes.
It's not A for sure.

Because its talking about revenue not profits.

Cost has nothing to do with revenue.

Your right E is plausible but it conflicts with a stimulus. So E would be a last resort.

C works. It's not super clear but it makes sense.

BTW, this is a gmat prep question so its legit.

Why do so many people here bash Kaplan? Their user interface and labs are really good - the former of which better than any other prep company.
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by maihuna » Fri Jul 24, 2009 9:05 am
Guys it makes sense in following way, in fact I saw an article yesterday about a semi-conductor company giving similar reasons, so seems realistic.

The retailers are making more money, of course it is mentioned on older models, while step mentions newly innovative etc, whatever be the reason, if the company makes most of its revenue by selling components to other companies even though it made money from retailer segment(assuming it is generating some revenue from some end-user perspective), if the revenue from component sale is sub-dude then overall revenue will decline.
But we are making some assumption here, in fact a lot, i.e. those component making companies are not doing well or not buying more from Deno... this is not an un-warranted assumption, but quite far, and I dont think necessarily true.

This makes te choice vague, but definetly plausible having the above assumption.
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