Deloitte Case question

Hi.

I have a question with the same case. I am not sure how they have the following solution to the question:

Using the provided data, model a P&L for both business model options for year one. Calculate operating profit (ignore interest, taxes, and depreciation) and round dollar amounts to the nearest $100K.

Correct Answers

Model A – Carrier 1 only total revenue: $6.5M

Model A – Carrier 1 only total costs: $1.7M

Model A – Carrier 1 only operating profit: $4.8M

Model B – Multiple carriers total revenue: $6.9M

Model B – Multiple carriers total costs: $2.3M

Model B – Multiple carriers operating profit: $4.6M

Could someone please elaborate how they arrived at those numbers? I can't even find the revenue answer correctly. Thank you so much!

Regards,

Hi Nick,

honestly, given the data I believe there is a flaw somewhere in the case. Why not contact them to find out?

Best regards

(edited)

The correct answer for the revenue side of things is as follows:

Total Market = 10million members

Post-paid users = 80%
2-year contract so only half will be after a contract = 50%
Market penetration = 5%

Total penetratable market each year = 10m * 80% * 50% * 5%
= 200,000

Model A units sold = Carrier 1 share = 30% * 200,000 = 60,000
Model B units sold = Carrier 2 + 3 + 4 share = (25% + 15% + 10%) * 200,000 = 100,000

Accessories revenue per phone = 20% * $30 * 1.5 = $9

Revenue = (Postpaid revenue + Accessories revenue) * units sold

Model A revenue = ($100 + $9) * 60,000 = $6.54m
Model B revenue = ($60 + $9) * 100,000 = $6.9m

(edited)