Overall revenue aim of company vs. profits

Question

The aim of the case is get $300m in revenue however the calculation was done based off of margins i.e. profits. Don't understand how this makes sense?

Answer 1

The margin is used to calculate the wholesale price. A wholesaler is upstream to the retailer. the exhibit only shows retailer price. To get the wholesale price : retailer price * (1- retailer margin)

Answer 2

Hi Akshay,

This case perfectly underscores the important of doing industry deep-dives to better understand how different markets work!

Wholesalers sell to retailers who sell to customers.

Customers pay price 100. Retailers pay price $50 (to wholesales). Wholesalers pay price $10 (to produce).

In the above example, the wholesaler makes $40 profit and the retailer makes $50 profit. With this same logic, you can backtrack from profit to revenues.

They gave you the retailer's profits from which you can deduce how much the wholesaler sold for!