OG -13 - Page 503 Question 11

[hsingh2088]

Hi all, I am trying to understand the logic of a question that I got wrong. Please see below.

The Maxilux car company's design for its new luxury model, the Max 100, included a special design for the tires that was intended to complement the model's image. The winning bid for supplying these tires was submitted by Rubco. Analysts concluded that the bid would only just cover Rubco's costs on the tires, but Rubco executives claim that winning the bid will actually make a profit for the company.

Which of the following, if true, most strongly justifies the claim made by Rubco's executives?

(A) In any Maxilux model, the spare tire is exactly the same make and model as the tires that are mounted on the wheels.

(B) Rubco holds exclusive contracts to supply Maxilux with the tires for a number of other models made by Maxilux.

(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.

(D) When people who have purchased a carefully designed luxury automobile need to replace a worn part of it, they almost invariably replace it with a part of exactly the same make and type.

(E) When Maxilux awarded the tire contract to Rubco, the only criterion on which Rubco's bid was clearly ahead of its competitors' bids was price.


The correct answer is D, but I eliminated it for this reason.

"Rubco executives claim that winning the bid will actually make a profit for the company."

In the real world, a bid's firm pricing is only specific to that bid and each bid does not assume future purchases for any given material. For that reason, I eliminated D because the answer is assuming that Rubco will create a new market for itself, even though it just stated that the bid itself will bring profit to the company, when the bid itself will not bring any profit to the company at all. I feel like that this question is very unfair and that the answer should be B because of being able to eliminate everything else...

Can someone please explain why these stupid test makers decided that D would be the appropriate answer even though the wording in the statement automatically eliminates it??

[ikaplan]

My 2 c.
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The correct answer choice should confirm that with this deal, Rubco will not only cover the costs but make profit (keyword: profit; it can be either on the short or on the long run)

(A) In any Maxilux model, the spare tire is exactly the same make and model as the tires that are mounted on the wheels.
Discard this one: it is not stated in the argument that initially Rubco intended to supply 4 tires per car.

(B) Rubco holds exclusive contracts to supply Maxilux with the tires for a number of other models made by Maxilux.
Does this in any way leads to the keyword profits? Not necessarily. It can be the case that for other models as well Rubco can only cover the costs of tires.

(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.
So transportation costs can be lowered... but this is too far-fetched. It's a lukewarm premise.

(D) When people who have purchased a carefully designed luxury automobile need to replace a worn part of it, they almost invariably replace it with a part of exactly the same make and type.
This guarantees that all those who will need a tire to replace will turn to Rubco. When a customer turns to a tire replacement store he pays a retail price (which in the real world is higher than the production one). Also, tire replacements guarantees a continuous stream of cash on the long run. Assume that all people who purchased the model each time they need to replace a tire, they will go to Rubco. This confirms that Rubco sacrifices short term gains for long-term profits.In order to better understand this argument, try putting yourself in the shoes of a Rubco manager: you sold something for zero, but each day people come to you and only you to repair the stuff. Awesome, right?

(E) When Maxilux awarded the tire contract to Rubco, the only criterion on which Rubco's bid was clearly ahead of its competitors' bids was price.
A lukewarm premise. We do not really care what was the award criteria. It only confirms that the starting point for Rubco is zero; the latter was already stated in the argument.

[ikaplan]

[theCodeToGMAT]

The option {D} shows the future scope of Scale of the Rubco Tires. The word "almost" plays very vital role in showing the future scope of scale.

Even though Rubco had given a lower quote for the installed tires, it may cover expensives by raising the price of the tires that will be purchased from the Market.

So, {D}

[hsingh2088]

Thanks for the responses guys. I most certainly see that replacing the tires after their worn out is a good business model, I just have my test taking filters on. Here is where I am stuck, the sentence clearly states

"Rubco execs claim that the winning bid, will actually make a profit for the company" when the analysts argue that the bid would only cover costs.

I feel like these two statements are at odds with each other based on how it is formatted

That to me tells me that Rubco claims that the bid will actually make them the profit. Nowhere in that argument does it state that Maxilux owners will buy new tires in the future. That was my second best option because the stem had nothing to say about future purchases, but had everything to do with just talking about the profit-less bid....

That's my issue with this question. I feel that it is unfair and still disagree with D, but hey, what do I know...

[GMATGuruNY]

The Maxilux car company's design for its new luxury model, the Max 100, included a special design for the tires that was intended to complement the model's image. The winning bid for supplying these tires was submitted by Rubco. Analysts concluded that the bid would only just cover Rubco's costs on the tires, but Rubco executives claim that winning the bid will actually make a profit for the company.

Which of the following, if true, most strongly justifies the claim made by Rubco's executives?

(A) In any Maxilux model, the spare tire is exactly the same make and model as the tires that are mounted on the wheels.

(B) Rubco holds exclusive contracts to supply Maxilux with the tires for a number of other models made by Maxilux.

(C) The production facilities for the Max 100 and those for the tires to be supplied by Rubco are located very near each other.

(D) When people who have purchased a carefully designed luxury automobile need to replace a worn part of it, they almost invariably replace it with a part of exactly the same make and type.

(E) When Maxilux awarded the tire contract to Rubco, the only criterion on which Rubco's bid was clearly ahead of its competitors' bids was price.

Premise: The bid to supply tires for the Max 100 will just cover Rubco's costs.
Conclusion: As a result of winning the bid, Rubco will make a profit.
For the conclusion to be valid, what must be true?
As a result of winning the bid, Rubco must be able to make a profit in SOME OTHER WAY.

Answer choice D: When people who have purchased a carefully designed luxury automobile need to replace a worn part of it, they almost invariably replace it with a part of exactly the same make and type.
This answer choice shows how Rubco can make a profit: when purchasers of the Max 100 need a new tire, they will buy the specially-designed tire made by Rubco.

The correct answer is D.

Reasons to eliminate:

A: The spare tire is irrelevant. It is given as a PREMISE -- as a FACT not in dispute -- that supplying tires for the Max 100 will not yield a profit.

B: Since these contracts are already held by Rubco, they are not affected by the bid to supply tires for the Max 100.

C: How the tires are produced is irrelevant. It is given as a PREMISE -- as a FACT not in dispute -- that supplying tires for the Max 100 will not yield a profit.

E: Irrelevant. It is given as a PREMISE -- as a FACT not in dispute -- that Rubco supplied the winning bid. The correct answer must show how -- as a RESULT of winning the bid -- Rubco will realize a profit.

That to me tells me that Rubco claims that the bid will actually make them the profit. Nowhere in that argument does it state that Maxilux owners will buy new tires in the future. That was my second best option because the stem had nothing to say about future purchases, but had everything to do with just talking about the profit-less bid....

The bid is provide tires for the MANILUX CAR COMPANY.
This bid will just cover Rubco's costs.
D is about providing tires for PEOPLE WHO HAVE PURCHASED the Max 100.
Nowhere in the passage is it stated that providing tires for CONSUMERS is part of the original bid.
Thus, these consumers can serve as a source of profits for Rubco.