medium · 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 has long sold its various products at a slightly higher per-unit price point than the first company has historically charged its own customers.
- The first company chose to spend roughly 10% more on executive bonuses this year than it had paid out to its leaders in the prior fiscal year.
- Both companies source their raw materials from exactly the same set of global suppliers under broadly comparable long-term fixed-price contract terms.
- Raw materials make up a slightly smaller share of the first company's total annual production costs than they do of the competitor's cost base.
Sign up free to see the explanation and track your rank →
More GMAT Verbal practice
- What logical role do the first two statements play?
- Which of the following is the conclusion?
- A gardener says: 'All roses in this garden require daily wat… — What is the role of the st
- What is the conclusion?
- What is the conclusion?
- Which statement is the conclusion?
- What is the conclusion?
- What logical role does the first sentence play in the researcher's argument?