hard · GMAT Verbal
A company's quarterly earnings report showed that while total sales volume increased by 20%, net profit decreased by 5%. The CEO explained that this was due to a massive 50% increase in the cost of raw materials. However, a competitor in the same industry, facing the same 50% increase in raw material costs, reported a 10% increase in net profit over the same period.
Which of the following, if true, most helps to resolve the apparent discrepancy between the two companies' profit outcomes?
- The competitor had recently deployed a highly automated manufacturing process that cut its labor costs by 30%, offsetting the rise in material costs.
- The competitor sells its products at a slightly higher price point than the first company has historically charged.
- The first company spent 10% more on executive bonuses this year than it did in the prior year.
- Both companies source their raw materials from the same global suppliers under comparable contract terms.
- Raw materials make up a larger share of the first company's total production costs than they do of the competitor's.
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