The total amount of profits of Brandeburgh Bicycle Company

This topic has expert replies
Master | Next Rank: 500 Posts
Posts: 227
Joined: Sun Apr 08, 2012 4:53 am
Thanked: 12 times
Followed by:3 members
The total amount of profits of Brandeburgh Bicycle Company (BBC) must have increased dramatically over the last 5 years. After BBC developed a light and strong new material for its bicycles, total sales increased to twice what they were 5 years ago. Nevertheless, sales of certain types of bicycles, for which the new material is not used due to its high cost, have remained constant or, as is the case with bicycles for children, have decreased. Four years ago, sales of children's bicycles constituted 30 percent of the total bicycle sales of BBC, and now they constitute barely 20 percent of all BBC's sales.

Which of the following must be assumed in order for the assertion that the total amount of profits of BBC has increased dramatically over the last several years to be true?
(A)Increased sales always result in increased profits.
(B)BBC bicycles are not significantly more expensive than 5 years ago.
(C)Over the last 5 years, total sales of BBC racing bicycles did not decrease by more than 70 percent.
(D)Over the last 5 years, the average amount of profit gained by BBC per bicycle sale has decreased by less than 50 percent.
(E)The proportion of bicycle market occupied by bicycles of BBC has not decreased over the last 5 years.

OA D
Source: — Critical Reasoning |

GMAT/MBA Expert

User avatar
Elite Legendary Member
Posts: 10392
Joined: Sun Jun 23, 2013 6:38 pm
Location: Palo Alto, CA
Thanked: 2867 times
Followed by:511 members
GMAT Score:800

by [email protected] » Sun Aug 11, 2013 1:04 pm
Hi guerrero,

This CR prompt involves a little bit of math, which is not common on Test Day (although you could see 1 CR that involves percents).

There are a LOT of details in the prompt and you have to pull them all out to properly answer the question.

Info:
-BBC: total sales of bikes DOUBLED compared to 5 years ago
-The new material in the bikes is more expensive (notice the phrase: due to ITS HIGH COST)
-Sales of other types of bikes (without the new material) have stayed the same or decreased

Conclusion:
-BBC's PROFITS must have increased dramatically

The deductions you need to make:
-The increased PROFITS probably came about because of the sales of the new bikes (sales of everything else stayed the same or decreased, and I'd have to assume that everything else stayed the same - cost of materials, etc.). The new material in these bikes is MORE EXPENSIVE, so the bikes cost more to make than before. We don't know anything about the price of the bikes (did it change or did it stay the same?), so we CAN'T factor that into argument. We need an answer that tells us that DOUBLING the sales of the bikes was more than enough to offset the HIGHER COST of the bikes. At the end, we have to think about the amount of profit per bike. The only way to logically connect all of these ideas is to assume that any decreased profit per bike wasn't too much because the conclusion is that the TOTAL profits increased dramatically.

So, look for an answer that addresses the timeline, bikes and profits. The correct answer includes all of that (and accounts for the fact that sales DOUBLED, so there would be a limit to how much profits could decrease).

GMAT assassins aren't born, they're made,
Rich
Contact Rich at [email protected]
Image

Newbie | Next Rank: 10 Posts
Posts: 3
Joined: Fri Sep 21, 2012 1:22 am

by hariharanv » Wed Aug 14, 2013 11:03 am
Hi Rich!

I am having a conflict b/w Option A and D. Though from your explanation it is that D is the right answer, can you explain what is the issue with option A?

What you have explained is effectively option A right?

Thanks.

GMAT/MBA Expert

User avatar
Elite Legendary Member
Posts: 10392
Joined: Sun Jun 23, 2013 6:38 pm
Location: Palo Alto, CA
Thanked: 2867 times
Followed by:511 members
GMAT Score:800

by [email protected] » Wed Aug 14, 2013 5:12 pm
Hi hariharanv,

I can see why you might be tempted by answer A. The reason I moved past it is because it doesn't match the specifics of the prompt (and since CR prompts are specific, the corresponding correct answer ALSO must be specific; in other words, vague-sounding answers are usually wrong). Here, answer A doesn't talk about BBC, any type of bicycles, new materials (and the higher cost of the new materials) - literally almost NOTHING that the prompt talked about (with the exception of higher sales). Since the prompt asks us to assume something about BBC's situation, I need an answer that talks about BBC.

GMAT assassins aren't born, they're made,
Rich
Contact Rich at [email protected]
Image