Break even question

Question

why does it calculate the BEP by the cost difference, instead of calculating each BEP and compare one by one? I still don't understand the logic behind it

Answer 1

Hi there,

I think this is an interesting question that may be relevant for many people. I would be happy to share my thoughts on it:

Given the question is whether to have 1 or 5 distribution centers, it's enough to see with what option you'll reach the break-even point (BEP) sooner. Since distribution centers are cost centers, you can do so by comparing the relative fixed cost advantage of one option with the running cost advantage of the other option.
However, you could also answer the question by calculating the BEPs separately and comparing them, where you would see a difference in BEP of about 9 years.

If you would like a more detailed discussion on how to best prepare your upcoming interviews, please don't hesitate to contact me directly.

Best,

Hagen

Answer 2

Hi there,

I think you're saying why don't we calculate the BEP for 1 center and the BEP for 5 centers? And then compare?

If that's the case, yes, I agree! The author here got “cute” which can sometime be helpful (shortcuts can be faster), but can also be dangerous (mistakes).

In this particular instance I would calcualte the BEPs seperately and compare.

Answer 3

Hi Abdel, Just look for “profitability” in the case library search box. You will find several cases. As Ian mentione... (read entire answer)

Hi Abdel, Just look for “profitability” in the case library search box. You will find several cases. As Ian mentioned, I suggest you work with peers or a coach to get the best... (read entire answer)

Answer 4

I'm not sure what connections you are trying to draw here. Can you give us more details into your question pls? Updat... (read entire answer)

I'm not sure what connections you are trying to draw here. Can you give us more details into your question pls? Update based on comment by OP: In a so-called profitability case,... (read entire answer)

Answer 5

Hi there, There's no concrete answer here on how to optimize this! However, what I can recommend is picking the 1-2 o... (read entire answer)

Hi there, There's no concrete answer here on how to optimize this! However, what I can recommend is picking the 1-2 offices where you legitimatelly have a connection and apply t... (read entire answer)