Question

Last August the XT chain of gasoline stations had a temporary sales promotion in effect. In the promotion, any customer who made a purchase of ten or more gallons of gasoline was entitled to a free car wash. For the month of August, XT experienced a ten percent increase in gasoline sales as compared to sales in August the previous year, so evidently the promotion was successful as a means of boosting sales.
In evaluating the argument, it would be most helpful to answer which of the following?

(A) In the areas in which XT’s gasoline stations operate, how did total combined gasoline sales for all gasoline stations last August compare with sales for the previous August?

(B) Was the money that XT earned from the increase in gasoline sales enough to offset the cost of providing free car washes during the promotion?

(C) Were there any customers who bought ten or more gallons at an XT gasoline station during the promotion who would have bought gasoline at the same station in lower quantities, but more frequently, if the promotion had not been in effect?

(D) Did XT or any of its gasoline stations have to pay other businesses to provide the car washes that customers were offered in the promotion?

(E) Are XT’s gasoline sales in August usually significantly higher than one twelfth of XT’s annual gasoline sales?

Answer 1

Answer:

(B) Was the money that XT earned from the increase in gasoline sales enough to offset the cost of providing free car washes during the promotion?

Explanation:

Answer (A) does not include the free car wash promotion variable.

In option (C) it is very likely that consumers would have bought gasoline more frequently and in smaller quantities without the promotion, but this issue is not useful enough as an analysis for XT.

It is not so relevant to know if gas stations or XT had to pay other companies to perform car washes (D), because it is assumed that this issue must have been resolved before applying the promotion.

That is why, when evaluating the argument, it would be more useful to answer if the increase in gas sales was enough to offset the cost of providing free car washes during the promotion (B). If the 10% increase in sales was not enough to cover the cost of car washes then the promotion would ultimately result in loss for XT.