Fri, 10/02/2009 - 02:54
An eyeglass manufacturer tried to boost sales for the summer quarter by offering its distributors a special discount if their orders for that quarter exceeded those for last year’s summer quarter by at least 20 percent. Many distributors qualified for this discount. Even with much merchandise discounted, sales increased enough to produce a healthy gain in net profits. The manufacturer plans to repeat this success by offering the same sort of discount for the fall quarter.
Which of the following, if true, most clearly points to a flaw in the manufacturer’s plan to repeat the successful performance of the summer quarter?
(A) In general, a distributor’s orders for the summer quarter are no higher than those for the spring quarter.
(B) Along with offering special discounts to qualifying distributors, the manufacturer increased newspaper and radio advertising in those distributors’ sales areas.
(C) The distributors most likely to qualify for the manufacturer’s special discount are those whose orders were unusually low a year earlier.
(D) The distributors how qualified for the manufacturer’s special discount were free to decide how much of that discount to pass on to their own customers.
(E) The distributors’ ordering more goods in the summer quarter left them overstocked for the fall quarter.
Based on the success of the discount offer over the summer, the manufacturer plans to extend the same offer for the fall quarter. The question asks you to find the answer choice that identifies a flaw in this plan, that is, a reason for thinking that, even though the plan was successful in the summer quarter, it will not succeed in the
fall.
Choice E is the best answer since it indicates that the increase in sales during the summer quarter has reduced the number of potential sales during the fall quarter. That makes it unlikely that the discount plan can continue to boost sales in the same way.
Choice A is incorrect because the discount program is based on a comparison between a distributor’s sales in a quarter and the sales in the same quarter the previous years, rather than in the previous quarter. Since advertising helps the distributors sell to their retail customers, choice B provides no reason for thinking the plan will not succeed in the fall. Choice C is incorrect: although part of the success of the discount incentives in the summer may have come from distributors’ recovering to more normal sales, that does not provide a reason for thinking that the same increase in sales cannot occur in the fall quarter. Choice D is also incorrect: distributors’ flexibility in deciding how to take advantage of the discounts give no reason for thinking that the discounts will fail to increase fall sales.