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?
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
Labor cost = #personnel x average wage per month x #month
= 6.25K x 4 x 12
= 25K x 12 (mental math priority)
=25K x 4 x 3 (mental math shortcut)
=300K per year
Variable cost = operating cost per km x #km = 20 x #km
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)
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Antonello
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replied on Aug 31, 2020
McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching
Hi, in addition to the solution proposed by Mounir, I would like to suggest similar cases in the platform to practice with:
After +5 years of candidate coaching and university teaching, and after having seen hundreds of cases, I realized that the economic-related knowledge needed to master case interviews is not much, and not complex. However, you need to know where to focus! Hence, I created the guide that I wish I could have had, summarizing the most important economic and financial concepts needed to solve consulting cases, combining key concepts theorical reviews and a hands-on methodology with examples and ad-hoc practice cases.
It focuses on 4 core topics, divided in chapters (each of them ranked in scale of importance, to help you maximize your time in short preparations):
· Economic concepts: Profitability equation, Break even, Valuation methods (economic, market and asset), Payback period, NPV and IRR, + 3 practice cases to put it all together in a practical way.
· Financial concepts: Balance sheet, Income statement/P&L and Performance ratios (based on sales and based on investment), +1 practice case
· Market structure & pricing: Market types, Perfect competition markets (demand and supply), Willingness to pay, Pricing approaches, Market segmentation and Price elasticity of demand, +1 practice case
· Marketing and Customer Acquisition: Sales funnel, Key marketing metrics (CAC and CLV) and Churn, +1 practice case
Feel free to PM me for disccount codes for the guide, and I hope it helps you rock your interviews!
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