If Shipping costs are reduced by 20% shouldnt the cost be 16 not 4(which is 20% of 20...)

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Luca

Coach

on Jan 21, 2020

BCG |NASA | SDA Bocconi & Cattolica partner | GMAT expert 780/800 score | 200+ students coached

Hello Justus,

In the text is written that

A consolidation of suppliers reduces transport costs by EUR 4 million (EUR 20 million * 20%)

As you may notice, the author talks about a reduction of costs 4M€, It means that, as you were suggesting, the new cosi is: Original cost - Reduction = 20M€ - 4M€= 16 M€.

Does it make sense?

Best,
Luca

1 comment

Marwane

on Jun 8, 2020

Hello, i think that the 20% should be applied to the cost of transportation of the new sales volume which is 501,5 M. Therefore, the cost reduction will be 20% * 501.5*0,03 = 3M. 0,03 being the transport cost per sale. Am I wrong?

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Clara

Coach

on Jan 21, 2020

McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Indeed!

The 20% is precisely 4 M, so the new figure is 16 (20 - 4 = 16 M)

Cheers!