Hey community, could someone help me understand the breakeven equation used in the solution.
USD (3.0m – 0.5m) / ((USD 225/barrel - $190 / barrel)/2) = 143,000 barrels.
What does the $190/barrel represent?
Cheers, thank you
Schedule mock interviews on the Meeting Board, join the latest community discussions in our Consulting Q&A and find like-minded Interview Partners to connect and practice with!
Back to overview
9
21
16
21
15
22
17
12
25
10
8
18
7
Show more
Be the first to answer!
Nobody has responded to this question yet.
Hi there,
in this part of the case, you are comparing the two options of selling the brewery to JBI, in which case ABC would get $3 million right away with nothing further to do, versus partnering with BBC. So the intention would be to determine the number of barrels (and associated timeline) that would have to be produced by ABC under the BBC partnership to reach the same $3 million profit for ABC - and to assess whether that is reasonable.
The equation you referenced is based on the BBC partnership stipulations illustrated in Exhibit 4. They claim 20% of the brewery capacity for themselves (which corresponds to 100k barrels). This means that everything ABC would be producing would be on top of that. In Exhibit 5, you can see that the production cost per barrel is at $190 for the production volume range of 100-250k barrels. ABC can sell a barrel for $225 (also in Exhibit 5). So in order to get the profit, you subtract the cost from the revenue. However, ABC will have to share half of their profits with BBC, hence you need to divide by 2. Using all of these parameters and boundary conditions, you will arrive at the breakeven equation for this specific comparison.
I hope this clarifies the situation and the thought process behind it. Feel free to message me directly in case of further questions.
Best
Sign up for free to read all answers.
Sign up for free to read all answers.
Similar Questions
Consulting
Why is there no good option for Factory H? The table provided und my calculations would suggest, that Moving appears to be the best option. Cheers
on Dec 10, 2024
DACH
3
700+
3 Answers
700+ Views
Consulting
How should I approach structuring and presenting a profitability case ("root cause analysis")?
on Dec 12, 2024
Global
4
1.2k
4 Answers
1.2k Views
Consulting
[Solved] Warum berechnet man bei der Kosteneinsparung 60% * 11,4% * 80M?
on Jan 05, 2025
DACH
2
1.3k
2 Answers
1.3k Views
Consulting
Average spend per transaction increase by about 7%?
on Jan 10, 2025
Europe
4
1.2k
4 Answers
1.2k Views
Consulting
Why do we have to calculate the Payback period with the incremental profits and not only with the profits from the second store?
on Jan 30, 2025
Global
3
900+
3 Answers
900+ Views
Consulting
Could someone give a good explanation of ROI>100% using the ROI=NET PROFIT/ COST OF INVESTMENT?
on Jan 30, 2025
Global
4
1.3k
4 Answers
1.3k Views
Consulting
Hi, would be super glad if somebody could help me out here. I don't fully understand how the profit per barrel in the partnership, e.g. at 50'000 barrels is 17.5. Wouldn't it still be a loss at that point? Also, how did we arrive at the estimate of 5-6 years until breakeven?
on Feb 01, 2025
DACH
3
600+
3 Answers
600+ Views
Consulting
Part 2.3: Why are 300 cars sold in the Americas, that need to make up for the -600.000€ deficit?
on Feb 02, 2025
DACH
2
600+
2 Answers
600+ Views
Consulting
Any tips to project yourself as organised and strutured as possible in the stressful environment of a case interview?
on Mar 17, 2025
Global
9
800+
9 Answers
800+ Views
Consulting
Where do we take into account the 90% protein requirement for soy isolate?
on Mar 28, 2025
Global
2
500+
2 Answers
500+ Views
Consulting
Question 9: Why do we calculate the effect with the old Revenue, instead of the new?
on Apr 02, 2025
DACH
1
500+
1 Answer
500+ Views
Consulting
How strictly should I commit to being objective orientated?
on Apr 21, 2025
Global
7
700+
7 Answers
700+ Views
Consulting
When to use Absolute vs % Comparisons?
on Jul 05, 2025
Global
4
100+
4 Answers
100+ Views
Expert case by
