Cost savings?

Question

Hi! I had a quick question about this Preplounge case called "YodaPhone" - just about the calculation of benefits realized at the end of the case.

The client had additional benefits of $14.1. They had cost savings of 5.4M (original cost was 12M) --> Wouldn't that mean that the total benefits realized after costs = 14.1M - (12M - 5.4M) = 14.1M - 6.6M = 7.4M dollars realized after costs? The solution written on the case seems to calculate benefits realized as (total benefits - cost savings) instead.

A bit confused about the logic of subtracting the amount of costs saved from the benefits realized as opposed to subtracting the actual costs. If anyone could let me know if/how I'm thinking about this the wrong way I'd be super grateful :)

Answer 1

Hello!

I would recommend you to directly ping the author, he is in PrepL!

Hope it helps!

Cheers,

Clara

Answer 2

Hi there,

Well done! Great catch. You are correct and there is a mistake :)

Instead of subtracting $5.4M, you should subtract $6.6M which is the cost of 5.5 teams for 12 months.

Total benefits realized after costs should be $7.5M.

The case will be updated shortly.

Answer 3

Hi, Welcome, you’ve come to exactly the right place! In our Case Library, you’ll find more than 220 practice cases cr... (read entire answer)

Hi, Welcome, you’ve come to exactly the right place! In our Case Library, you’ll find more than 220 practice cases created by our experienced coaches, trusted partner firms, and... (read entire answer)