This is a strengthen question, so your first step should be to find the necessary assumption that must be true for the argument to be true. Then, the correct answer choice will provide evidence that affirms or strengthens this assumption.

The evidence is that TLT and EI distribute the same kind of batteries to national electronic store chains and that employee wages make up the same percentage of each company's annual costs. The conclusion that TLT comes to is that slashing its employee wages by 10% will allow them to gain a competitive advantage over EI. The assumption is that slashing the wages will NOT have a negative effect on TLT's earnings that would offset the savings.

The correct answer choice will provide evidence that affirms or strengthens this assumption.

Choice E does exactly that. Choice E states that lowered employee wages have no effect on the quantity of rechargeable batteries that can be distributed to the client stores. This supports the assumption that slashing the wages will NOT have a negative effect on TLT's earnings that would offset the savings. Does it PROVE that there will be no negative effect? No, as you said, maybe the quality is reduced even if the quantity is the same. But we are not supposed to prove the argument here. We are just supposed to strengthen it. And choice E provides evidence that strengthens the necessary assumption on which the argument depends. None of the other answer choices do the same.

C is incorrect because it has no bearing on the argument at all. The cost of living for their respective employees has nothing to do with the argument that lowering employee wages will result in a competitive advantage for TLT.

Hope this helps!