Profit from computer sales

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The Iceman: Master | Next Rank: 500 Posts; Posts: 194; Joined: Mon Oct 15, 2012 7:14 pmFollowed by: 6 members; Location: India; Thanked: 47 times

by The Iceman » Wed Dec 19, 2012 5:26 am

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 firsttime 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.

Source: Beat The GMAT — Critical Reasoning | Wed Dec 19, 2012 5:26 am

Ankur87: Master | Next Rank: 500 Posts; Posts: 110; Joined: Sun Aug 19, 2012 4:39 am; Thanked: 9 times; GMAT Score:640

by Ankur87 » Wed Dec 19, 2012 9:45 am

The Iceman wrote: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 firsttime 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.

IMO : D
confused between DandE but will go with D
because if total computers sold were 10 then smaller proportion is for PXC computers with smaller profit margin like 1,2,3 or 4
and bigger proportion is for greater profit margin (sold more than 5 computers)
so the profit is considered to be higher last year than previous year.

in E we don't know the exact production cost e.g. it can be 2 rs less. (won't affect much)

charu_mahajan: Master | Next Rank: 500 Posts; Posts: 111; Joined: Tue Jan 31, 2012 1:06 pmFollowed by: 8 members; Thanked: 15 times

by charu_mahajan » Wed Dec 19, 2012 10:39 am

I guess the answer is D

Since it's an inference question, it does not has a conclusion and we have to draw one.

Evidence presented is -
First time buyers - buy cheap PCX comps
People who replace old comps - buy expensive PCX models
Last year - Profit High although Same number of PC's sold, Price per PC almost same.

Although Same number of PC's were sold and Price per PC did not increase, Something has changed that has increased the profit.

Buyers = First time buyers (Less money)+ Buyers who replace comps(More money)

If we consider that proportion of first time buyers decreased, then definitely the proportion of buyers who replace comps increased because the sales was constant. And if the proportion of buyers who replace comp increased, profits increased as they bought expensive computer. This was the deciding factor here.

Hope this helps.

The Iceman: Master | Next Rank: 500 Posts; Posts: 194; Joined: Mon Oct 15, 2012 7:14 pmFollowed by: 6 members; Location: India; Thanked: 47 times

by The Iceman » Wed Dec 19, 2012 11:17 am

Ankur and Charu, you both have nailed it

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