Question

In 1984 Exco, which sells its products only through mail-order catalogs, began distributing its catalog to people who had never purchased Exco’s products, while it continued to distribute the catalog to previous customers. Total dollar sales increased in 1984, but Exco’s profits that year were smaller than in 1983.

Which of the following, if true, contributes most to an explanation of Exco’s smaller profits in 1984, as compared to 1983?

• A. There was a two percent increase in 1984 in the sales tax that consumers had to pay on all purchases from the catalog.
• B. A greater number of catalogs were sent to previous customers than to people who never purchased products from Exco.
• C. In 1984 Exco’s product-manufacturing costs increased by a smaller amount than the products’ selling prices increased.
• D. Customers who never previously purchased products from Exco purchased, on the average, fewer products in 1984 than did previous customers.
• E. The increase between 1983 and 1984 in the cost of mailing the catalogs was greater than the increase in sales from 1983 to 1984

Answer 1

The correct option is E

The increase between 1983 and 1984 in the cost of mailing the catalogs was greater than the increase in sales from 1983 to 1984

Option (e) is the correct answer. Check the video for the approach.