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The whole calculation for the number of current customers who order coffee doesn't make sense at all!!

American Airlinks
New answer on Aug 13, 2021
1 Answer
759 Views
Linnan
Premium
asked on Aug 11, 2021

we don't need the complicated data to calculate the the number of current customers who order coffee(I will just assume there are X customers ordering free coffee currently). We don't need to know how many exactly the X is we can make the decision that B-coffee can help AA get more profit. 

here is the calculation:

For B-coffee: $4/person, 10% profit margin(50%*20%), X current customers ordering coffee, with B-coffee the number will go down 25%. profit=X*(1-75%)*4*10%=0.3X

For current coffee:$3/person, 20% profit margin, X current customers ordering coffee, with current-coffee the number will go down 70%. profit=X*(1-70%)*4*10%=0.18X, which is obviously smaller than 0.3X since X must be positive.

All those complicated data is just for us to calculate X, which doesn't need to know at all for solving the problem.

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Best answer
Ian
Expert
Content Creator
replied on Aug 13, 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi Linnan,

I'm not too familiar with your case so am taking your word for it - thanks for pointing this out to others!

As I flagged in another recent Q&A, this is a super important lesson - make sure that you learn how to do efficient math in cases! The more you can find reasonable “shortcuts”, or, really, the efficient, most direct ways to solve a problem, the better you'll do!

The general rule is to 1) Figure out what actually needs to be calculated and 2) Figure out all of the “small” calcs before you blow the numbers up bigger.

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Ian

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