Infra cost calculation

Gas Grogginess
New answer on Dec 28, 2019
1 Answer
776 Views
Max asked on Dec 28, 2019

Why do we need to subtract 10% from the Infra cost calculation. It is stated that consumption decreases by 10%, how to conclude it is 10% implication on Infra.

Rgds,

M.

Overview of answers

Upvotes
  • Upvotes
  • Date ascending
  • Date descending
Best answer
Luca
Expert
Content Creator
replied on Dec 28, 2019
BCG |NASA |20+ interviews with 100% success rate| 120+ students coached |GMAT expert 780/800 score

Hello Max,

There is a little typo on the solution. In a warmer winter you will have gas consumption reduced by 10%, that implies a reduction of 10% of sales and variable costs (the hypothesis is to consider them linearly dependant).

Talink about the Infrastructure costs, they are composed by fixed (60%) and variable(40%) costs. Applying the saving on the variable part you have:

240*40%*10%=9.6

So that the new Infrastructure costs will be 240-9.6=230.4

Does it make sense?
Feel free to contact me if you have any doubt.

Luca

Was this answer helpful?
Max on Dec 29, 2019

Perfect ! Once again Thanks a lot!

Luca gave the best answer

Luca

Content Creator
BCG |NASA |20+ interviews with 100% success rate| 120+ students coached |GMAT expert 780/800 score
56
Meetings
2,683
Q&A Upvotes
29
Awards
19 Reviews