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Im not certain why cost is deducted from revenue for the entirety of the contract bid.

Baby formula
New answer on Feb 18, 2021
2 Answers
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Ukasha asked on Feb 18, 2021

To derive the entirity of the contract bid - shouldnt we add COGS and 15% discount to the bid value itself so that those costs are covered?

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Ian
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replied on Feb 18, 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi Ukasha,

If I understand your question correctly, the answer is embedded in the case here:

  • Typically, the client calculates profitability by deducting COGS & Overhead from the retail price.
  • In such a scenario of bidding, the supplier needs to find out how much profit he can forfeit in order for the deal to remain attractive.
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Clara
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replied on Feb 18, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

It´s stated in the case, here > "Typically, the client calculates profitability by deducting COGS & Overhead from the retail price"

Cheers,

Clara

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Ian gave the best answer

Ian

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