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jainrahul1985: Master | Next Rank: 500 Posts; Posts: 228; Joined: Sun Aug 17, 2008 8:08 am; Thanked: 4 times

by jainrahul1985 » Sat Jun 26, 2010 10:52 pm

First-time computer buyers buying PXC home computers typically buy models that cost much less and have a smaller profit margin per computer than do PXC computers bought by people replacing their computers with more powerful models. Last year PXC's profits from computer sales were substantially higher than the previous year, although about the same number of PXC computers were sold and the prices and profit margins for each computer model that PXC sells remained unchanged.

If the statements above are true, which of the following is most strongly supported by them?

(A) PXC's competitors raised the prices on their computers last year, making PXC computers more attractive to first-time computer buyers.
(B) The number of people buying PXC computers who also bought PXC computer-related products, such as printers, was larger last year than the previous year.
(C) Among computer buyers who bought a PXC computer to replace their existing computer, the proportion who were replacing a computer made by a competitor of PXC was greater last year than the previous year.
(D) The proportion of PXC computers bought by first-time computer buyers was smaller last year than the previous year.
(E) PXC's production costs for its computers were lower last year than they had been the previous year.

OA [spoiler]D
can someone explain why not B[/spoiler]

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Source: Beat The GMAT — Critical Reasoning | Sat Jun 26, 2010 10:52 pm

albatross86: Master | Next Rank: 500 Posts; Posts: 392; Joined: Sun May 16, 2010 2:42 amFollowed by: 10 members; Location: Bangalore, India; Thanked: 116 times; GMAT Score:770

by albatross86 » Sat Jun 26, 2010 11:05 pm

Typical first-time buyers of PXC prefer models that cost less and have smaller profit margins than the models bought by buyers who are replacing their PC with more powerful models.

Last year, PXC's profits higher than the previous year, though same number of total computers were sold and prices, profit margins, etc. did not change.

What can we INFER?

A. Incorrect. The statement clearly says "prices remained unchanged".

B. We are only concerned with profits from Computer sales and NOT that from computer-related product sales. This brings in irrelevant information.

C. This only tells us about what they replaced, how can this be inferred from the statements, which only talk about the PXC computers and not the competitor's PCs.

D. The total number remained same, but perhaps now more of these were the higher-costing models. This means that more products were sold that had a higher profit margin and so this explains the increase in profits.

E. Costs were lower last year. But this is not possible. We are told the selling price remained unchanged, so how can the cost change without affecting profit margin. The statement says profit margin also remained unchanged, and so the costs must also have been the same.

Pick D.

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pnk: Master | Next Rank: 500 Posts; Posts: 292; Joined: Fri Jul 17, 2009 8:39 amFollowed by: 1 member; Thanked: 6 times

by pnk » Sun Jun 27, 2010 1:09 am

albatross86 wrote: E. Costs were lower last year. But this is not possible. We are told the selling price remained unchanged, so how can the cost change without affecting profit margin. The statement says profit margin also remained unchanged, and so the costs must also have been the same.

Pick D.

I also picked D, but considered E irrelevant, till I read your analysis. Its not irrelevant but fails the evidences mentioned in the argument.

Thanks Albatross86

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GMATGuruNY: GMAT Instructor; Posts: 15539; Joined: Tue May 25, 2010 12:04 pmFollowed by: 1906 members; Location: New York, NY; Thanked: 13060 times; GMAT Score:790

by GMATGuruNY » Sun Jun 27, 2010 3:39 am

This in an inference question.

Inference question = Reading Comprehension

We need to find an answer choice that is supported by the limited facts in the passage, just as we would with a Reading Comp question.

Facts in passage:

Replacement purchases generate higher profits than first-time purchases
Profits up, total sales unchanged

Prediction: Number of replacement purchases was higher, generating the higher profits

(A) PXC's competitors raised the prices on their computers last year, making PXC computers more attractive to first-time computer buyers. Not supported; no info about competitors in the passage
(B) The number of people buying PXC computers who also bought PXC computer-related products, such as printers, was larger last year than the previous year. Not supported; no info about other products in the passage
(C) Among computer buyers who bought a PXC computer to replace their existing computer, the proportion who were replacing a computer made by a competitor of PXC was greater last year than the previous year. Not supported; no info about competitors in the passage
(D) The proportion of PXC computers bought by first-time computer buyers was smaller last year than the previous year. Correct. If the proportion of first-time purchases was smaller, then the proportion of replacement purchases was higher; the passage suggests that there were a higher number of replacement purchases, generating the higher profits.
(E) PXC's production costs for its computers were lower last year than they had been the previous year. Not supported; no info about production costs in the passage

The correct answer is D.

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Testluv: GMAT Instructor; Posts: 1302; Joined: Mon Oct 19, 2009 2:13 pmFollowed by: 164 members; Location: Toronto; Thanked: 539 times; GMAT Score:800

by Testluv » Sun Jun 27, 2010 8:38 pm

can someone explain why not B

A proper inference is something that MUST BE TRUE. Choices that could be true but also could be false are incorrect.

Because the scope of the passage confined itself to "profits from computer sales" we can't infer anything about items that are not computers--even if they are "computer-related".

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killer1387: Legendary Member; Posts: 581; Joined: Sun Apr 03, 2011 7:53 amFollowed by: 5 members; Thanked: 52 times

by killer1387 » Wed Aug 17, 2011 7:35 am

Hey,

In option E if we link the production cost as Profit = revenue- production cost
then we can take it into account how after considering this fact we negate the option? please explain.

GMATGuruNY wrote:This in an inference question.

Inference question = Reading Comprehension

We need to find an answer choice that is supported by the limited facts in the passage, just as we would with a Reading Comp question.

Facts in passage:

Replacement purchases generate higher profits than first-time purchases
Profits up, total sales unchanged

Prediction: Number of replacement purchases was higher, generating the higher profits

(A) PXC's competitors raised the prices on their computers last year, making PXC computers more attractive to first-time computer buyers. Not supported; no info about competitors in the passage
(B) The number of people buying PXC computers who also bought PXC computer-related products, such as printers, was larger last year than the previous year. Not supported; no info about other products in the passage
(C) Among computer buyers who bought a PXC computer to replace their existing computer, the proportion who were replacing a computer made by a competitor of PXC was greater last year than the previous year. Not supported; no info about competitors in the passage
(D) The proportion of PXC computers bought by first-time computer buyers was smaller last year than the previous year. Correct. If the proportion of first-time purchases was smaller, then the proportion of replacement purchases was higher; the passage suggests that there were a higher number of replacement purchases, generating the higher profits.
(E) PXC's production costs for its computers were lower last year than they had been the previous year. Not supported; no info about production costs in the passage

The correct answer is D.

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