Percentage of customers needed to buy the warranty in order to keep WyCar’s profit margin from model “300” stable

Question

Can anyone guide me through this calculation please? I don't understand how the % that price reduction (€1000) represents of warranty profits (€1250) is directly related to the % of costumers needed to keep profits stable (80%).

Thank you in advance!

Answer 1

Hi there,

Fair question! So, because we are losing revenue from price reduction, we need to make up for this by gaining revenue from warranty sales.

This is a classic breakeven!

So, first, create the full formula, and then pulg-in what's missing.

Profit from warranty* % quantity sold = Profit loss from car
(Revenue from warranty - expected cost from warranty) * quantity sold = Profit loss from car
(2,350 - 1,100) * quantity sold = $1,000
1,250 * quantity sold = $1,000
Quantity sold = 1,000/1,250 = 80%

Answer 2

Absolutely not, the candidate has to propose his own ideas. This is the way they test you "business sense" during the... (read entire answer)

Absolutely not, the candidate has to propose his own ideas. This is the way they test you "business sense" during the interview. Best, Luca

Answer 3

Hi Micheal, - the installation (one-off) cost per station is 40% of 750€ -> 300€ - the yearly revenue per station... (read entire answer)

Hi Micheal, - the installation (one-off) cost per station is 40% of 750€ -> 300€ - the yearly revenue per station is 10% of 0,25 €/kWh * 20/100 kWh/km * 80% * 15.000km ->... (read entire answer)

Answer 4

Hello Seoyeon, I agree with you, the solution is a bit confusing. I would say that our model is expensive for 2 rea... (read entire answer)

Hello Seoyeon, I agree with you, the solution is a bit confusing. I would say that our model is expensive for 2 reasons: Only in large cities WTP is above 30k€ for a 150km... (read entire answer)