Hello John,

I will try to make it clear for you. Consider this question as a comparision of 2 alternatives. The first big assumption is regarding the revenues: you are gonna use the single decker bus in the routes with low number of passenger, **assuming that you can serve exactly the same amount of customers with a single decker bus**.

Hence you have to do the following comparision:

**Use Double decker buses**: Revenues=X and Cost=Y=61£/trip
**Use Single decker buses**: Revenues=X, Cost=Z=41£/trip and Bus price=420k£

The usage of single decker buses is convenient only if the cost saving (Y-Z) allows you to payback the initial investment (Bus Price) in less then 3 years:

- Bus price / (Y - Z) = 420k£ / (61-40) £/trip = 9500 trips --> Less then 3 years --> Ok

NB: The initial hypothesis regarding the revenues is not a given, that's why there is an additional comment on the solution:

One risk to consider is the potential revenue impact due to lower capacity, hence we need to be careful when selecting routes / times to operate with a single decker.

Does it make sense?

Best,

Luca

Hello John,

I will try to make it clear for you. Consider this question as a comparision of 2 alternatives. The first big assumption is regarding the revenues: you are gonna use the single decker bus in the routes with low number of passenger, **assuming that you can serve exactly the same amount of customers with a single decker bus**.

Hence you have to do the following comparision:

**Use Double decker buses**: Revenues=X and Cost=Y=61£/trip
**Use Single decker buses**: Revenues=X, Cost=Z=41£/trip and Bus price=420k£

The usage of single decker buses is convenient only if the cost saving (Y-Z) allows you to payback the initial investment (Bus Price) in less then 3 years:

- Bus price / (Y - Z) = 420k£ / (61-40) £/trip = 9500 trips --> Less then 3 years --> Ok

NB: The initial hypothesis regarding the revenues is not a given, that's why there is an additional comment on the solution:

One risk to consider is the potential revenue impact due to lower capacity, hence we need to be careful when selecting routes / times to operate with a single decker.

Does it make sense?

Best,

Luca