Hi !
Could you help me please with this question?, I can't get the correct answer that is B.
The average train for TrainCo carries 23 M km x tons per year, however, volume varies by line and the profitability for some of them might be negative. Given the data on Exhibit#3, which is the breakeven utilization for a train to be profitable?
(a) 7 M km x tons
(b) 10 M km x tons
(c) 12 M km x tons
(d) 23 M km x tons
(edited)
Plenty of people are rejected due to this breakeven question type. This is super easy with this structure ^^
STRUCTURE RULES
Structure the breakeven equation first. Define the breakeven metric. Calculate each component by translating the prompt. Do mental math shortcut and math priority
Breakeven structure
At breakeven,
Profit = 0
Revenu – cost = 0
Revenu structure
Revenue = Freight rate per ton*km x #km x #ton/train
Revenue = 0.07 x #km x 1000
= 70 x #km
Cost structure
Cost = Lease cost + Labor cost + Variable cost
Cost = 200K + 300K + 20 x #km
= 500K + 20 x #km
Breakeven resolution in km per year
Revenu - Cost = 0
70 x #km - 500K + 20 x #km = 0
(70-20) x #km = 500K
#km = 500K / 50
#km = 10 K per year
Breakeven resolution in km x tons per year
To break even the train need to achieve 10K km
Each train pull 1 000 tons
To break even the train need to achieve 10K km * 1 000 tons = 10K*1K = 10M km x tons
Answer (b)
STRUCTURE FORMULAS
At breakeven, Profit = 0.
25 is a mental math priority
12 has as mental math shortcut 2 x 6 and 3 x 4
Upvote if it is useful ;)
(edited)
Hi, in addition to the solution proposed by Mounir, I would like to suggest similar cases in the platform to practice with:
Hope it helps,
Antonello
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