Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
expert
Expert with best answer

Marcello

100% Recommendation Rate

1 Meetings

23 Q&A Upvotes

USD 149 / Coaching

4

Question about the math in a practice question.

Figured this out: Need to read more carefully.

Hello All,

I am a PhD outside of the business field so maybe I am missing something. I was doing some of the practice questions on this site and came across a question that I belive is incorrect. The question is: If the profit margin of the company in 2013 was 15%, what was the total revenue in the period?​

In case the attached image does not post the total costs of the company in 2013 was $544 million and the solution provided is:

Solution:

Total expenditure of the company in 2013 = $544.44 mn

Profit percentage = 15%

Revenue = 115% of costs = $640 mn

544.44 / 0.85 = 640 mn

However, $544 million x 1.15 is actually $626 million, an answer that was provided as an option but said to be wrong. Is it not correct to get the costs, figure out 15% of the costs, and then add that to the costs to determine the total revenue?

Figured this out: Need to read more carefully.

Hello All,

I am a PhD outside of the business field so maybe I am missing something. I was doing some of the practice questions on this site and came across a question that I belive is incorrect. The question is: If the profit margin of the company in 2013 was 15%, what was the total revenue in the period?​

In case the attached image does not post the total costs of the company in 2013 was $544 million and the solution provided is:

Solution:

Total expenditure of the company in 2013 = $544.44 mn

Profit percentage = 15%

Revenue = 115% of costs = $640 mn

544.44 / 0.85 = 640 mn

However, $544 million x 1.15 is actually $626 million, an answer that was provided as an option but said to be wrong. Is it not correct to get the costs, figure out 15% of the costs, and then add that to the costs to determine the total revenue?

(edited)

4 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Book a coaching with Marcello

100% Recommendation Rate

1 Meetings

23 Q&A Upvotes

USD 149 / Coaching

Hi Collin!

Hope you are well.

The solution 640 mn is correct. Let me explain:

If something has 15% margin it means that Margin / Sales = 15%

Therefore (Sales - Cost) / Sales = 15%

Also, Cost = (100%-15%)*Sales

Thus, if you know that Cost = 544mn, the equation you want to solve is:

544 = (100%-15%)*Sales; Sales = 544 / 85%; Sales = 640 mn

This way you can validate also that 544 / 640 = 85%; which leads to 15% Margin as you were told on the question.

In the response you show you are calculating an increment which is not correct:

544 / 626 = ~87%, which leads to a Margin of ~13%, which is not correct.

Is then clear? Basically you need to take into account that Margin is part of the sales, not an increment.

Let me know if you need something else!

Regards

Hi Collin!

Hope you are well.

The solution 640 mn is correct. Let me explain:

If something has 15% margin it means that Margin / Sales = 15%

Therefore (Sales - Cost) / Sales = 15%

Also, Cost = (100%-15%)*Sales

Thus, if you know that Cost = 544mn, the equation you want to solve is:

544 = (100%-15%)*Sales; Sales = 544 / 85%; Sales = 640 mn

This way you can validate also that 544 / 640 = 85%; which leads to 15% Margin as you were told on the question.

In the response you show you are calculating an increment which is not correct:

544 / 626 = ~87%, which leads to a Margin of ~13%, which is not correct.

Is then clear? Basically you need to take into account that Margin is part of the sales, not an increment.

Let me know if you need something else!

Regards

Hey Marcello! Thanks for pointing out that the margin is 15%. I read it as the revenue was 15% higher than the costs but clearly the revenues and margins are not going to be the same. Thanks! — Collin on Mar 17, 2020 (edited)

Book a coaching with Francesco

100% Recommendation Rate

3,479 Meetings

17,209 Q&A Upvotes

USD 449 / Coaching

Hi Collin,

the solution you reported has a mistake, as revenues are not 115% of the costs.

Given the information you provided, the formula to apply is the following:

(R-C)/R=15%

<->(R-544.44)/R=15%

<->(R-544.44)=0.15R

<->0.85R=544.44

<->R=544.44/0.85=640

Hope this helps,

Francesco

Hi Collin,

the solution you reported has a mistake, as revenues are not 115% of the costs.

Given the information you provided, the formula to apply is the following:

(R-C)/R=15%

<->(R-544.44)/R=15%

<->(R-544.44)=0.15R

<->0.85R=544.44

<->R=544.44/0.85=640

Hope this helps,

Francesco

Book a coaching with Antonello

98% Recommendation Rate

167 Meetings

6,608 Q&A Upvotes

USD 219 / Coaching

Hi, 15% is the margin.

Best,
Antonello

Hi, 15% is the margin.

Best,
Antonello

Book a coaching with Clara

100% Recommendation Rate

59 Meetings

16,346 Q&A Upvotes

USD 229 / Coaching

Hello!

In a nutshell: your mistake lays with the margin definition. 15% margin means that margin divided into sales is 15%

Cheers,

Clara.

Hello!

In a nutshell: your mistake lays with the margin definition. 15% margin means that margin divided into sales is 15%

Cheers,

Clara.

(edited)

Related case(s)

MBB Final Round Case - Smart Education

Solved 18.6k times
MBB Final Round Case - Smart Education Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvantaged areas. The client is considering starting operations for its services in the Chicago area. They hired us to understand if that makes sense. Due to the nonprofit regulation, SmartBridge should operate on its own in the market, without any partnership. How would you help our client?
4.6 5 649
| Rating: (4.6 / 5.0)

Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvant ... Open whole case

REA Reinsurance

Solved 12.0k times
REA Reinsurance Your client, REA, is a reinsurance company. REA recently acquired another reinsurance company (approximatively same size): the choice of this company was notably based on its product portfolio as well as its market presence which appeared complement with REA. However, the acquisition is not well received by the market. The acquisition price is considered too high and the transaction has not been well graded. REA management asks you to evaluate the transaction.
4.1 5 963
| Rating: (4.1 / 5.0)

Your client, REA, is a reinsurance company. REA recently acquired another reinsurance company (approximatively same size): the choice of this company was notably based on its product portfolio as well as its market presence which appeared complement with REA. However, the acquisition is not well r ... Open whole case

AirService

Solved 6.3k times
AirService Your client AirService is the service provider for a number of airports. The management realized a decrease in profits that is linked to increasing costs. How would you help them?
3.9 5 880
| Rating: (3.9 / 5.0)

Your client AirService is the service provider for a number of airports. The management realized a decrease in profits that is linked to increasing costs. How would you help them? Open whole case

MBB Case – Consulting a Government

Solved 5.0k times
MBB Case – Consulting a Government Our client is the government of an imaginary country which is suffering from strong protests and riots by its own population. The client would like to understand the reason for these protests. In a second step, the client wants you to make suggestions for improvement to end these protests. In answering those two questions, what factors would you consider in making your potential recommendation?  
4.5 5 226
| Rating: (4.5 / 5.0)

Our client is the government of an imaginary country which is suffering from strong protests and riots by its own population. The client would like to understand the reason for these protests. In a second step, the client wants you to make suggestions for improvement to end these protests. In answer ... Open whole case

Bain 1st Round Case – BlissOttica

Solved 2.7k times
Bain 1st Round Case – BlissOttica Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client?
4.3 5 130
| Rating: (4.3 / 5.0)

Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client? Open whole case