wine profit

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gkkk: Junior | Next Rank: 30 Posts; Posts: 25; Joined: Fri Nov 11, 2016 9:44 pm

by gkkk » Tue Feb 14, 2017 6:57 pm

Contrary to earlier predictions, demand for wine has not increased in recent years. Yet, even though prices and production amounts have also been stable during the last three years, wine producers last year increased their proï¬�ts by more than 10 percent over the previous year's level.

Any of the following statements, if true about last year, helps to explain the rise in proï¬�ts EXCEPT:

A - Consumers in many countries increased their home stockpiles of bottles of wine, yet their overall consumption of wine decreased.
B - Wine producers have saved money on wages by switching from paying laborers an hourly wage to paying them by the amount harvested.
C - The price of oil, the major energy source used by wine producers in harvesting their crops, dropped by over 20 percent.
D - Many small wine producers joined together to form an association of wine producers and began to buy supplies at low group rates.
E - Rainfall in wine-producing regions was higher than it had been during the previous year, allowing the growers to save money on expensive artiï¬�cial irrigation.

OA - A

Source: Beat The GMAT — Critical Reasoning | Tue Feb 14, 2017 6:57 pm

gkkk: Junior | Next Rank: 30 Posts; Posts: 25; Joined: Fri Nov 11, 2016 9:44 pm

by gkkk » Tue Feb 14, 2017 7:15 pm

I am really stuck here. I selected B . Below is my reasoning for the same.

demand of wine has not increased [This means it's either static or not decreased.]
last 3 yrs, price and production is also stable [lets call it no profit no loss.]

last year there profit increased by 10%. means something happened there. this is EXCEPT question so except one all will explain this.

A - Consumers in many countries increased their home stockpiles of bottles of wine, yet their overall consumption of wine decreased. -- if you increase home stockpile even if you are not drinking it will bring a profit to the producer. suppose a person drink 10 bottles in whole yr. and he stockpiled >=10. [profit]
if he stockpiled less then 10 then loss. --- still some profit is there so i kept it as profit in cases.

B - Wine producers have saved money on wages by switching from paying laborers an hourly wage to paying them by the amount harvested. --- suppose they pay $10 per hr, for 100 hrs harvesting work. now they pay one time.
after negotiations it turn out to be $1000. [no profit cases], paying hr. is more profitable anyways then later one.[i suppose this is not helping us.]

C - The price of oil, the major energy source used by wine producers in harvesting their crops, dropped by over 20 percent. --- profit in transportation, make sense.

D - Many small wine producers joined together to form an association of wine producers and began to buy supplies at low group rates. --- some how it is smelling profit to me.

E - Rainfall in wine-producing regions was higher than it had been during the previous year, allowing the growers to save money on expensive artiï¬�cial irrigation. --- saving some money in producing harvests [profit]

confused in A and B. both can be partial answers. even though if i have to select i will go with B.

Experts, any help will be most appreciable.

Thanks in advance.

GMAT/MBA Expert

ceilidh.erickson: GMAT Instructor; Posts: 2095; Joined: Tue Dec 04, 2012 3:22 pmFollowed by: 247 members; Thanked: 1443 times

by ceilidh.erickson » Wed Feb 15, 2017 11:27 am

demand of wine has not increased [This means it's either static or not decreased.]
last 3 yrs, price and production is also stable [lets call it no profit no loss.]

last year there profit increased by 10%. means something happened there. this is EXCEPT question so except one all will explain this.

You're absolutely right! But take this one step further: if demand, price, and production all stayed constant but profit went up, then COSTS must have gone down. We need to find 4 answer choices that suggest that there are lower costs.

A - Consumers in many countries increased their home stockpiles of bottles of wine, yet their overall consumption of wine decreased.
This doesn't actually affect cost (or demand or production). In this argument, we don't care why people wine (what the demand is for specifically). We only care about what accounted for a difference in profit. This is irrelevant.

You said:

- if you increase home stockpile even if you are not drinking it will bring a profit to the producer

This is not necessarily true. It might increase REVENUE, but not necessarily profit. And since we're told that stockpiles increased while consumption decreased, we're led to believe that purchases were roughly constant.

B - Wine producers have saved money on wages by switching from paying laborers an hourly wage to paying them by the amount harvested.
This helps to explain lower COSTS, and thus higher profit. That's not the same as saying it PROVES why profits increased (hourly wages could lead to higher costs or they could lead to lower costs, as you mentioned). But this might help to explain the scenario.

C - The price of oil, the major energy source used by wine producers in harvesting their crops, dropped by over 20 percent.
A lowered COST - this helps.

D - Many small wine producers joined together to form an association of wine producers and began to buy supplies at low group rates.
Lower COST of supplies - this helps.

E - Rainfall in wine-producing regions was higher than it had been during the previous year, allowing the growers to save money on expensive artiï¬�cial irrigation.
Saving $ = lower costs. This helps.

The only answer that doesn't indicate (at least the potential for) lower costs is A.

Please also POST YOUR SOURCE. Tell us where you got this question.

Ceilidh Erickson
EdM in Mind, Brain, and Education
Harvard Graduate School of Education

gkkk: Junior | Next Rank: 30 Posts; Posts: 25; Joined: Fri Nov 11, 2016 9:44 pm

by gkkk » Wed Feb 15, 2017 4:14 pm

Thanks ceilidh . That is making some sense to me now

Below is the link for the same.
https://www.gmatfree.com/module-83/wine-profits/

AjiteshArun: Newbie | Next Rank: 10 Posts; Posts: 6; Joined: Sat Feb 11, 2017 9:10 am; Location: Bangalore; Thanked: 1 times; GMAT Score:780

by AjiteshArun » Wed Feb 15, 2017 11:44 pm

gkkk wrote:Below is the link for the same.
https://www.gmatfree.com/module-83/wine-profits/

You might as well solve the actual GMAT question that this one is based on (Q51, OG 2016).

Contrary to earlier predictions, demand for sugarcane has not increased in recent years. Yet, even though prices and production amounts have also been stable during the last three years, sugarcane growers last year increased their proï¬�ts by more than 10 percent over the previous year's level.

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