critcal reasoning from MGAMT CAT

[raja_asu]

In order to save money, some of Company X's manufacturing plants converted from oil fuel to natural gas last year, when the cost of oil was more than the cost of natural gas. Because of a sudden, unexpected shortage, however, natural gas now costs more than oil, the price of which has fallen steeply over the past year. The cost of conversion back to oil would more than negate any cost savings in fuel. So Company X's fuel costs this year will be significantly higher than they were last year.

Which of the following is an assumption on which the argument above depends?
A. Company X does not have money set aside for the increased costs of fuel.
B. The increase in the cost of fuel cannot be offset by reductions in other operating expenses.
C. The price of natural gas will never again fall below that of oil.
D. The cost of fuel needed by those of Company X's plants that converted to natural gas is not less than the cost of fuel needed by those plants still using oil.
E. The price of oil will not experience a sudden and steep increase.

The correct answer is D.
1. But, if u think logically, even with higher natural gas prices than oil and oil price less than that of last year, the fuel cost of "Company X's plants that converted to natural gas " can be more than the fuel cost of "plants still using oil" and can still have total fuel coat for the company less than last year.

2. Even if we think the oil price stays the same as last year, for the chioce D to be true: the plants should have been divided equally between oil and natural gas as fuel.

Is the question printed wrong? or Please explain , why is choice D correct?

Thanks,

Rajesh

[StaceyKoprince]

I think you're right, Rajesh! I've passed this along to our curriculum director to take a look - please give him a little time to respond, though, as he's swamped right now.

[christiancryan]

Thanks for the spot, Rajesh -- we're guilty of poor wording on this question. Unit cost and total cost are not clearly distinguished, for one thing. We'll remove and rehab.

One other thing: I want to point out a generic flaw in your reasoning, Rajesh. Assumptions are NECESSARY but not necessarily SUFFICIENT. When testing an assumption, you should not see whether or not it could lead to an alternative conclusion (as you did). What you should do is NEGATE the assumption and assure yourself that the conclusion CANNOT be correctly drawn then. In other words, the correct assumption will generally NOT get you all the way to the conclusion -- it's just a stepping stone. But if you remove that stepping stone, then you should NOT be able to get to the conclusion. For instance, in this case, you would test D by saying "The cost of fuel needed by those of Company X's plants that converted to natural gas IS less than the cost of fuel needed by those plants still using oil" and then seeing whether you have fatally undermined the conclusion. The way we have written this question, that's not necessarily true (e.g., by changing the *quantities* demanded by the plants in question, you could still make the total cost this year higher than last year's total cost). So be careful with the way you treat assumptions.

Hope that's helpful!!

[jp.jprasanna]

Can some one explain me why is B wrong? Is it because we are not talking about the profit of the company rather the company's fuel cost only. Had Question read Company's profit this year would be significantly lower then option B would be correct?

Is there any other reason we can eliminate option B?

[tim]

absolutely. we are talking only about fuel costs. recouping this cost elsewhere does not affect fuel costs. as for changing the question around and asking whether B would then be correct, i would caution you against ever asking "what if" questions about changing parts of verbal questions, because there are often several interconnected parts that cannot be fully accounted for by a single change. just focus on why the right answer is right and why all the wrong answers are wrong..

[arunangsu9362]

If I think simply:
If Cost of Gas is not less than Cost Of Oil so there is no point in following the natural Gas Process

(D)

[jnelson0612]

If I think simply:
If Cost of Gas is not less than Cost Of Oil so there is no point in following the natural Gas Process

(D)

Yes, D illustrates the assumption we have to make to reach the conclusion.

[ramit.agarwal]

According to the question. Company X is looking to reduce its fuel cost.

I failed to understand why is B wrong & D right. Please help.

negating B:

The increase in the cost of fuel can be offset by reductions in other operating expenses.

This breaks the argument. So B should be right.

As for D, how is the comparison between cost of fuel needed by oil & natural gas plants determine fuel cost higher or lower.
Wouldn't it had been better if it is comparing cost of fuel needed by natural gas plants this year with cost of fuel need by oil plants last year.

[jlucero]

Ramit,

I (and some other instructors who posted above) agree with your second point and I hope that the question has been more clearly worded on our actual tests. However, B is still incorrect because the overall conclusion here is "Company X's fuel costs this year will be significantly higher than they were last year." Therefore, we don't care about any costs in this argument other than fuel costs. Eliminating every single cost other than fuel costs doesn't affect this argument one bit.