Critical Reasoning

Company X receives most of its revenues from the sale of gasoline through a network of gas stations that it ownsacross the country. The company purchases ready-for-sale gasoline from several oil refineries at wholesale pricesand sells it to the final consumer at its gas stations. Over the next quarter, the management of Company X expectsthat the market price of gasoline will rise by approximately 10 percent. Therefore, the management projects thatthe next quarter's revenues from the sale of gasoline will also increase by approximately 10 percent.

The management's projection is based on which of the following assumptions?

"¢Consumption of gasoline at the company's gas stations will not drop in response to higher prices.

"¢Company profits will not decline below their current level.

"¢Higher gasoline prices will not reduce the company's revenues from other business lines.

"¢The costs of gasoline purchased by the company for subsequent sale at its gas stations will remain relativelyconstant.

"¢The supply of gasoline is likely to decline over the next quarter

IMO a

Why not D

rob338 wrote:IMO a

choice A weakens the conclusion. choice D does not

The conclusion ' revenue from sale of gasoline will increase in the next quarter'

Dear HSPA,

Revenues are related to sale and they have nothing to do with cost.

So D is eliminated.

@HSPA

U are making a classic mistake...

Revenue = sales price per unit (X) * total no of unit (Y)

if u just look at the above formula, u come to know revenue is directly proportional to X and Y..Op A is targeting on Y so it is for sure an answer.

About Op D,

as u can again see from the above formula cost price has no bearing on revenue...so cost price does not affect revenue, hence incorrect.