Infra cost calculation

Gas Grogginess
New answer on Dec 28, 2019
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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.

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Luca
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replied on Dec 28, 2019
BCG |NASA | SDA Bocconi & Cattolica partner | GMAT expert 780/800 score | 200+ students coached

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

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Max on Dec 29, 2019

Perfect ! Once again Thanks a lot!

Luca gave the best answer

Luca

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