Hello, I am struggling to figure out the answer to this question from BCG Online Case library:
By what percentage does the client need to increase the average ticket price to maintain its profits?
You are given the following information:
- Sales: $1,500 millions
- Profit margin: 20%
- Expected fuel price increase: 50%
- Current fuel costs are half as high as non fuel costs
We are looking the percentage increase of the revenue that will keep our 20% margin.
Old cost= 800 (Non fuel cost) +400 (Fuel cost) = 1200
New cost=800 + 600 = 1400
Therefore the new equation should be:
(1500+x)-1400=0.2(1500+X)
I would need some help figure out what is wrong in my equation.
The answer is supposed to be 13.3%
Thanks a lot for your help
Hi, could you please explain why your fuel and non-fuel costs are 800 and 400, not 720 and 480? I get these and then my percentage increase of revenue is 26% Thank you for your help:) — Anonymous C on Oct 09, 2019 (edited)
It says "Current fuel costs are half as high as non fuel costs" — Anonymous D on Jan 27, 2020