Search This Blog

Q no. 58

Don’s, a chain of supermarkets, has entered into an agreement in which Rose Computers will sell Don’s an unlimited number of its least expensive PC’s at one-fourth the regular wholesale price. In return, Don’s has agreed to purchase all of its scanners and other electronic information-processing equipment from Rose or from Omicron, Rose Computers’ parent company, for the next ten years. Don’s will offer a Rose PC free to any school that turns in Don’s register receipts totaling $100,000 within the next six months. The vice-president in charge of advertising for Don’s expects that the computer giveaway will obviate the need for a massive new advertising campaign for the next six months and that Don’s can make up the expenditures for the PC’s by writing them off its income taxes as charitable donations.

The plans formulated by Don’s assume each of the following EXCEPT:

(A) The prices that Rose or Omicron charges Don’s for information-processing equipment over the next ten years will be lower than those charged by other companies.

(B) The tax laws will not be changed to exclude or lessen the value of charitable donations as tax write-offs.

(C) Schools will be sufficiently attracted by Don’s computer giveaway offer that teachers will urge students to shop at Don’s.

(D) Rose will be able to supply Don’s with a sufficient number of PC’s to meet the demand generated by schools that collect Don’s receipts totaling $100,000.

(E) The effect of the computer giveaway offer on Don’s business will be comparable to that of a major advertising campaign.

Official Answer: A

No comments:

Post a Comment