Practice Question 1: Optimal Pricing for Gasoline

A gas station is trying to determine the best price per liter to maximize profits. Here is the data:

Gasoline Price Cost Price (€) Cars Buying per Liters per Car per Week
(€) Week
€1.2/l €1.0/l 200 50
€1.3/l €1.0/l 150 45
€1.4/l €1.0/l 100 40
€1.5/l €1.0/l 80 35
Task:
What is the price per liter that maximizes gasoline profit?

Answer: €1.3/l

Practice Question 2: Impact of Pricing on Sales Volume

A company sells two types of fuel: Regular and Premium. The sales data is below:
Fuel Type Price (€ per Cost (€ per liter) Liters Sold per Week
liter)
Regular €1.3/l €1.0/l 5,000
Premium €1.6/l €1.2/l 2,500
The company is considering increasing the price of Premium fuel to €1.8/l, but estimates this will cause sales
volume to drop to 1,800 liters per week.
Task:
Should the company increase the price of Premium fuel to €1.8/l based on profit calculations?

Answer: Yes, because the profit will be €1080 (higher than original profit of €1000

Practice Question 3: Combined Revenue Optimization

A gas station also operates a mini-market, selling snacks and drinks. The mini-market revenue depends on the
number of customers who buy fuel. The data is below:
Gasoline Price (€) Cars Buying per Liters per Car per Week Mini-Market Sales per Car (€)
Week
€1.4/l 180 50 €12
€1.5/l 140 45 €13
€1.6/l 100 40 €14
€1.7/l 70 35 €15
The cost of gasoline is €1.3 per liter.
Task:
What price per liter should the station choose to maximize combined profits (gasoline + mini-market sales)?
Answer: €1.5/l

1. Revenue & Growth Calculation

A company’s revenue in 2023 was $8 million, and it grew by 12% in 2024.
📌 Question: What is the total revenue in 2024?

Answer: $ 8.96M

2. Profit Margin Calculation

A business sells a product for $50 per unit. The cost to produce one unit is $30.
📌 Question: What is the profit margin as a percentage?

Answer: 40%

3. Break-even Analysis
A company has fixed costs of $100,000 and variable costs of $10 per unit. The selling price per unit is $25.
📌 Question: How many units must be sold to break even?

Answer: 6667

4. Ratio & Proportion

A retailer has three types of products in stock:
 Laptops: 40%
 Tablets: 30%
 Smartphones: 30%
If the store has 500 devices in total,
📌 Question: How many tablets are there?

Answer: 150 tablets

5. Data Interpretation (Multiple Choice)

A restaurant tracks its monthly profit over four months:
Month Revenue ($) Expenses ($)
Jan 30,000 20,000
Feb 35,000 22,000
Mar 40,000 25,000
Apr 38,000 24,000
📌 Question: In which month did the restaurant have the highest profit?
A) January
B) February
C) March
D) April
Answer: C) March
Our client Murphy Oil is a major global oil and gas company headquartered in El Dorado, Arkansas, U.S. The
company operates in various countries, namely, Untied States, Canada, Malaysia, the UK, Europe and parts of
Africa. Murphy Oil owns the whole oil value chain: upstream, downstream, distribution, and retail. They call
these business lines.
We are dealing with the Chief Operating Officer (COO) of Murphy Oil Retail Business line (MORB). His
organization consists of multiple gas stations in inner-city locations throughout the globe. These gas stations
two parts: (1) Forecourt – gas or fuel sold at the pumps and (2) Backcourt - the convenience stores at the gas
station.
Recently, the profitability of MORB has declined, and the COO would like us to help figure out why this is the
case and to come up with a plan of remedy for the next five years.
(Question 1 of 12)
How will you structure this issue?
(click the image to enlarge)

A.

B.

C.
Which of the following structure best fits the case?
Answer: C
Explanation:

This question tests your ability to understand the client’s core ask and address that in a structured format. This is
a key skill in consulting and generally the first question that is asked in a case.
The main prompt discusses Murphy Oil’s multiple business lines but focusses only on MORB or its Retail
business, which is comprised of Forecourt and Backcourt. The prompt also mentions the profits are down and
asks you to understand why and how you can recover those in 5 yrs. Structure C addresses all of those by
focusing on only MORB and not other business lines that are not relevant.
Bucket 1 focusses on understanding MORB, its P&L and understanding profitability of this business line.
Bucket 2 focusses on finding root causes of low profits, just like the prompt asks. This is a MECE bucket
looking at both Forecourt and Backcourt. Bucket 3 focusses on finding solutions to the root causes to recover
profitability in 5 yrs.
Structure A addresses all of Murphy Oil’s business lines hence it is not a good fit for this prompt. We are not
concerned about Upstream and Downstream business lines. The COO does not control those business lines.
Those business lines are superfluous information and should be ignored in the structure
Structure B tries to maximize MORB’s profits without understanding why the profits dropped. Understanding
why profits dropped is a key ask from the client in the prompt. The client actually wants to know the reasons.
This structure goes into solutioning without understanding the root causes and therefore misses a key scope or
ask from the client.
Always understand what the client ask is and what information to focus on in a prompt and only then build a
bespoke structure that addresses the problem at hand.
(Question 2 of 12)
Next question:
Over the past fifteen years, the overall number of gas stations worldwide has declined by 6%. What do you
think might be the causes of this decline?
More gas stations open 24 hours a day (so fewer stations needed)
Changing population patterns (fewer gas stations in rural areas)
Answer: A, C, D
Explanation:
This is a brainstorming question that requires business acumen or business judgment.
Bullets B and E cannot contribute to a decline in number of gas stations globally. Increase of cars on the road
should actually drive up number of gas stations. Introduction of Hydrogen fuels should have no impact on
number of gas stations because its for hydrogen cars only that aren’t significant to begin with.
Rest of the bullets, A, C & D actually contribute to the world needing fewer gas stations.
Let's proceed.
(Question 3 of 12)
P&L focused word problem - It turns out there have been two other changes in the oil & gas retail market.
1. The first one is that the number of gas stations with convenience stores attached has increased.
2. The second one is that a major new entrant has begun taking market share. Supermarkets have begun
opening gas stations in their parking lots. They are typically located in suburbs in any country, rather
than inner-city locations. This is not yet a major competitor in the US, where they only have 10% of the
market, but supermarkets have 30% of the gas market in the UK, and 60% in France.
The COO wants to understand whether the new entrants, or supermarkets, have a better business model than the
traditional gas stations in the gas retail market. So as part of this exercise he would like you to calculate a key
metric of this industry - Return on Invested Capital (ROIC): operating profit / invested capital.
The numbers for the UK supermarket gas sales are as follows:
 They sell 10 million liters of gas per year at $1.44 per liter. Their cost is 40 cents/liter.
 They pay 90 cents/liter in tax.
 The convenience Store’s operating profit is $1M per year.
 Overhead in the industry is typically 10% of fuel sales, and that’s accurate here.
 The capital cost is $4 million.
Answer: B
Explanation:
This is a problem-solving question that requires understanding the math question, formulating an equation and
then solving it. The math is a bit tricky in cases and can take a bit of time to adjust to. The best candidates can
step back and think about it for a second before proceeding.
 Total operating profit = operating profit from gasoline sales + operating profit from convenience store
 [10 million liters * ($1.44 - 0.40 - 0.90) - 10 million liters * $1.44 * 10%] + $1 million = $0.96 million
 Invested capital = $4 million. So, ROIC for Supermarkets is = Total operating profit/Invested capital =
$0.96M / $4M = 24%
(Question 4 of 12)
P&L focused word problem - Murphy Oil (MORB’s) gas stations located in downtown London, one of our
busiest locations.
 This location sells 6 million liters per year at $1.50 per liter; its cost and tax per liter are the same as the
supermarket.
 Convenience store profit is 20% lower than the supermarkets. Overhead is still 10% of fuel sales, and
capital costs are $8 million.
Without running the numbers, what do you think our client Murphy Oil’s gas station’s ROIC will be - Higher or
Lower? Type the answer below without doing calculations.
Answer: Much lower
Explanation:
This is a question related to ball parking the math. This is an important skill consultants use to get to an answer
quickly. This also tests your ability to use math concepts to your advantage and estimate where the answer
could lie.
This right answer is much lower because of the client’s cost of capital $8 million is twice as much as
supermarket’s capital cost $4 million.
(Question 5 of 12)
P&L focused word problem - Murphy Oil (MORB’s) gas stations located in downtown London, one of our
busiest locations.
 This location sells 6 million liters per year at $1.50 per liter; its cost and tax per liter are the same as the
supermarket.
 Convenience store profit is 20% lower than the supermarkets. Overhead is still 10% of fuel sales, and
capital costs are $8 million.
Calculate the ROIC for this gas station.
Please enteric numeric values only in %. For instance, type 10 if your answer is 10%.
Answer: 13.75%
Explanation:
This question tests your ability to formulate equations and calculate math. This also relates to the information
above so you are required to utilize integrated reasoning and data gathering abilities to answer the question.
This distributed nature of the data causes complexities.
 Total operating profit = operating profit from gasoline sales + operating profit from convenience store =
[6 million liters * ($1.5 - 0.40 - 0.90) - 6 million liters * $1.5 * 10%] + $.8 million = $1.1million
 Invested capital = $8 million
 ROIC for Supermarkets is = $1.1M /$8M = 13.75%
(Question 6 of 12)
Review the information below and answer the questions.

If the Total Diesel sales on Wednesday were to double, would that offset the Total Estimated Theft in a week?
Options are Yes, No or it will be equal
Answer: No
Explanation:
Total diesel sales on Wednesday = 2240 litres
Double of that is 2240 x 2 = 4480 litres
Total theft in a week = 4900 litres
So no, the doubling of diesel sales would not offset the total estimated theft in a week.

(Question 7 of 12) - Identifying Root Causes of Profit Decline

Which factors could be contributing to MORB’s profit decline?
A. Increased competition from supermarkets
B. Decreased fuel margins due to rising crude oil prices
C. Decline in urban car ownership
D. Higher convenience store theft rates
E. Expansion into high-rent locations without sufficient demand
✅ Answer: A, B, C, D, E

(Question 8 of 12) - Break-even Analysis

If MORB’s fixed costs are $10M per year and its gross margin per liter is $0.15, how many liters of gasoline
must it sell annually to break even?
✅ Answer: 66.67M liters
🔎 Explanation:
Break-even volume = Fixed Costs / Gross Margin per Liter
= $10M / $0.15 = 66.67M liters

(Question 9 of 12) - Convenience Store Revenue Impact

If 40% of gas station customers also purchase from the convenience store, and the average store sale per
customer is $8, how much additional annual revenue does a station with 1M customers per year generate from
the store?
✅ Answer: $3.2M
🔎 Explanation:
Store revenue = 1M × 40% × $8 = $3.2M

(Question 10 of 12) - Price Elasticity Impact

If MORB raises fuel prices by 5%, but volume drops by 10%, what happens to total revenue?
✅ Answer: Revenue decreases
🔎 Explanation:
Price elasticity > 1, meaning the percentage drop in sales is greater than the percentage price increase,
leading to lower revenue.

(Question 11 of 12) - Long-Term Strategy

Which long-term strategy could best improve MORB’s profitability?
A. Increasing fuel prices to improve margins
B. Expanding to suburban locations to compete with supermarkets
C. Investing in premium fuel and loyalty programs
D. Reducing convenience store theft
✅ Answer: C, D
🔎 Explanation:
 A (Price increase) may backfire due to high elasticity.
 B (Suburban expansion) is capital-intensive and risky.
 C (Premium fuel & loyalty programs) increase revenue without relying on volume.
 D (Theft reduction) directly increases profits.

(Question 12 of 12) - Quick Mental Math

If convenience store sales account for 30% of total MORB revenue, and MORB’s total revenue is $1B, what
is the store revenue?
✅ Answer: $300M
Congratulations, you received a score of 7 out of 8. This was calculated by adding up the number of
correct answers you chose for the multiple-choice questions.
Question 1
You have been brought on by a United States based tennis racquet manufacturing company, StrikeCo, to
determine whether they should enter the European market. While you may not know the ins and outs of the
manufacturing process, the company values your input as a well-regarded consulting firm.
What 4 things would you examine first when structuring your approach to this task?
 3. Size the European market for tennis racquets
 This is important, as the size of the market is a key indicator of if entering the market is
attractive. In addition, sizing the market helps us determine which products to introduce.
 5. Determine which products are to be sold in the European market
 Once we’ve segmented the market, we can begin to decide which specific products warrant
further examination for market entry.
 6. Figure out the competitive landscape for racquets in Europe (competitors, customer preferences, etc.)
 The size of the market means nothing without knowing how many companies are already
occupying the landscape. A crowded market becomes much less attractive.
 2. Determine the costs (fixed and variable) it will take to enter the European market through various
methods (partnership, acquisition, etc.)
 This determines potential profitability, which is the lifeline of a business.
Question 2
StrikeCo, after careful consideration, is deciding between launching a racquet in Europe targeted at children
aged 5-10 or a racquet targeted at teenagers 13-18. Before making this decision, what are some key questions
that they should ask to get to the best possible move?
Pick the 4 that make the most sense to you.
 2. Which market within Europe are we looking at?
 Europe is not a homogenous entity. We must narrow down our options.
 8. What is the respective competitive landscape?
 Each country will have a different number of competitors with various offerings targeting the 2
age groups. This is another way to narrow our options.
 6. What is the anticipated growth in each segment?
 This is a specific question that deals with population growth and the popularity of tennis. We
want to be in a high growth market.
 4. What is the profitability in each segment?
 Growth and profitability potential indicate the future health of a European venture. We can’t
make a final decision without examining these factors.
Question 3
Further analysis has shown that the children’s racquet sells for $100 and has a profit margin of 15%, and the
teenager racquet sells for $150 and has a profit margin of 10%. The cost to enter the market for the children’s
racquet is $10M, and the cost to enter the market for the teenager’s racquet is $15M. How many racquets must
be sold in each category to break even?
 For children’s racquets we make $15 on every racquet sold. $10M / $15 = 666.6K racquets sold
 This option makes more sense in a vacuum given that it requires significantly less racquets to be
sold before reaching profitability.
 For teenager’s racquets we make $15 on every racquet sold. $15M / $15 = 1M racquets sold
Question 4
Whenever examining a particular segment and/or market, there are unique factors that differentiate that
market. For example, light bulbs in California must follow more stringent energy usage guidelines than in other
U.S. states. It is prudent to plan around this when examining a particular market. What are some factors unique
to selling children’s racquets compared to selling teenagers' or adults' racquets that the client should be aware
of?
 Product
 Designs, durability, features
 Price
 Willingness to pay, price sensitivity, purchasing power
 Promotion
 Ad regulations, marketing techniques for kids, targeting kids and parents
 Place
 Different distribution channels, placement in stores - kids or sports section?
Question 5
Given that we must sell less children’s racquets, StrikeCo has decided to go with this option. One of the key
things that StrikeCo needs to know, however, is how big the market is. Please estimate the total addressable
market based on the figures below for Germany and Italy.
 The total addressable market for Germany is 75M * 0.08 * 0.3 = 1.8M
 The total addressable market for Italy is 60M * 0.08 *.25 = 1.2M
 Due to the larger size of the German market, this is the more attractive market
 However, significant competitive analysis needs to be performed to see if capturing 666K (about
30% of the market) is doable. There could be large players operating in Germany already.
 Racquet replacement rate is also a key consideration. Planned obsolescence could be a viable
strategy.
Question 6
The CEO of StrikeCo has asked for an update. What do you recommend for StrikeCo’s European expansion
plan?
 StrikeCo should not enter the European market
 While Germany has TAM of 1.8M people, we need 666K, or about 30% market share, to break
even on our investment
 This assumes children only use 1 racquet, which is a big assumption
 In addition, racquets are not commonly purchased every single year
 Risks
 Lack of expansion could lead to being outcompeted by other U.S.-based competition
 Next Steps
 Look at other markets
 See if profitability can be increased
 Look into planned obsolescence to increase racquets sold
 Examine how fragmented the German market is
 NEW CASE

Our client, SwiftAir, is a major airline headquartered in Frankfurt, Germany. The company operates short-
haul and long-haul flights across Europe, North America, and Asia. SwiftAir has a low-cost carrier (LCC)
division and a full-service airline (FSA) division.
Recently, profitability in the short-haul segment has declined, and the CEO has asked us to analyze the
causes and suggest a five-year turnaround plan.

(Question 1 of 12) - Structuring the Problem

How would you structure this issue?
A. Analyze the profitability of both short-haul and long-haul segments, breaking them down into revenue and
cost drivers.
B. Focus only on the short-haul segment, dividing the analysis into market trends, revenue challenges, and cost
inefficiencies.
C. Look at industry-wide trends, such as fuel prices and airport regulations, without analyzing SwiftAir’s
specific performance.

(Question 2 of 12) - Industry Trends

Over the past decade, passenger volume on short-haul flights has declined by 10%. What might be the key
reasons?
A. The rise of high-speed rail as a competitive alternative
B. More passengers choosing premium long-haul flights instead
C. Increased environmental regulations and taxes on short-haul flights
D. A growing preference for private jet travel

(Question 3 of 12) - Profitability Metrics

SwiftAir’s CEO is concerned that low-cost carriers (LCCs) have a more profitable model than traditional
full-service airlines (FSAs). To compare, calculate Operating Profit Margin using:
Operating Profit Margin=Operating ProfitRevenue\text{Operating Profit Margin} = \frac{\text{Operating
Profit}}{\text{Revenue}}
For an LCC:
 Revenue = $5 billion
 Operating profit = $750 million
What is the Operating Profit Margin for the LCC?
(Question 4 of 12) - Ballpark Estimation
SwiftAir’s short-haul division has:
 Revenue = $8 billion
 Operating profit = $400 million
Without doing precise calculations, do you think SwiftAir’s short-haul operating profit margin is higher or
lower than the LCC’s?

(Question 5 of 12) - Profitability Calculation

Now, calculate SwiftAir’s short-haul operating profit margin using the same formula.

(Question 6 of 12) - Cost Analysis

One of SwiftAir’s major cost drivers is airport landing fees, which are $100 per flight. The airline operates
50,000 short-haul flights per year.
If SwiftAir negotiates a 20% reduction in landing fees, how much will it save annually?

(Question 7 of 12) - Competitive Strategy

Which of the following strategies would help SwiftAir compete more effectively with low-cost carriers?
A. Reducing in-flight services for economy passengers to lower costs
B. Increasing ticket prices to target premium travelers
C. Partnering with high-speed rail operators for combined air-rail tickets
D. Cutting marketing expenses to focus only on loyal customers

(Question 8 of 12) - Customer Preferences

A passenger survey shows that 60% of short-haul travelers prioritize low ticket prices over comfort, while
40% prefer premium service.
If SwiftAir wants to increase customer retention, what would be the best pricing strategy?
(Question 9 of 12) - Fuel Cost Savings
SwiftAir spends $1.2 billion per year on fuel. If they invest in fuel-efficient aircraft, reducing fuel costs by
8%, how much will they save annually?

(Question 10 of 12) - Market Share Calculation

SwiftAir carries 30 million short-haul passengers per year, while the total market size in its key regions is
300 million passengers.
What is SwiftAir’s market share in percentage terms?

(Question 11 of 12) - Revenue Growth Strategy

Which of the following strategies could help increase short-haul revenue?
A. Introducing dynamic pricing based on demand fluctuations
B. Charging extra fees for seat selection and priority boarding
C. Expanding short-haul routes to secondary airports with lower costs
D. Offering all-inclusive fares with free checked baggage

(Question 12 of 12) - Investment Decision

SwiftAir is considering investing $500 million in airport lounge upgrades for short-haul flights to attract more
business travelers.
If the expected annual profit increase from this investment is $75 million, what is the expected Return on
Investment (ROI) using:
ROI=Annual Profit Increase/ Investment Cost
 Case: Improving Profitability for TrendyWear
Background
TrendyWear is a global fast-fashion retailer headquartered in London, UK. It operates over 2,500 stores across
North America, Europe, and Asia. The company follows a fast-fashion model, rapidly designing, producing,
and distributing new clothing collections based on the latest trends.
However, TrendyWear’s profitability has declined over the past two years. The CEO has asked your
consulting team to help analyze the issue and develop a five-year strategy to restore growth.

(Question 1) - Structuring the Issue

How would you structure this problem to analyze the profitability decline?
(Select ONE answer)
A. Examine overall industry trends, customer behavior, and competitor strategies before analyzing
TrendyWear’s financials.
B. Focus directly on TrendyWear’s revenue and cost structure, then identify areas where profitability is being
eroded.
C. Start by segmenting TrendyWear’s customer base and identifying potential marketing issues before looking
at financials.

(Question 2) - Industry Trends

Which of the following are likely contributing to TrendyWear’s profitability decline?
(Select MULTIPLE answers)
A. Rise of sustainable fashion brands attracting younger customers.
B. Increased tariffs on imported raw materials.
C. Decreasing social media influence on fashion trends.
D. Growth of online resale platforms (e.g., Depop, ThredUp).

(Question 3) - Revenue Decline Analysis

TrendyWear’s total revenue last year was $10 billion, but it dropped 5% this year. What is the total revenue
this year?
(Enter a numeric value in billions, e.g., "9.5")

(Question 4) - Cost Structure Analysis

Without calculating, how do you expect TrendyWear’s operating margin to compare to a luxury brand
like Gucci?
(Select ONE answer)
A. Higher
B. Lower
C. About the same

(Question 5) - Pricing Strategy

Currently, TrendyWear sells 80 million units of clothing annually, with an average price of $20 per unit. The
CEO is considering lowering prices by 10% to increase sales volume by 15%.
What will be TrendyWear’s total revenue after the price change?
(Enter a numeric value in billions, e.g., "9.5")

(Question 6) - Supply Chain Efficiency

TrendyWear's supply chain costs are $3 billion annually. If the company can cut 15% of these costs, how
much will it save?
(Enter a numeric value in billions, e.g., "0.5")

(Question 7) - Competitive Strategy

Which of the following strategic initiatives would best help TrendyWear regain market share?
(Select MULTIPLE answers)
A. Partner with social media influencers to boost online visibility.
B. Expand into higher-priced premium fashion segments.
C. Introduce eco-friendly clothing collections to attract sustainability-conscious customers.
D. Reduce store locations and focus entirely on e-commerce.

(Question 8) - Cost Reduction Initiatives

Which of the following actions could help reduce TrendyWear’s costs without hurting customer
experience?
(Select MULTIPLE answers)
A. Optimize store layouts to reduce rent costs per square foot.
B. Shift more production to lower-cost countries.
C. Reduce staff in stores, leading to longer checkout times.
D. Improve demand forecasting to reduce unsold inventory.

(Question 9) - Inventory Management

TrendyWear’s average inventory turnover ratio is currently 4 times per year. If the company improves
efficiency and raises turnover to 5 times per year, how will this affect working capital?
(Select ONE answer)
A. Increase working capital
B. Decrease working capital
C. No impact

(Question 10) - Store Performance Evaluation

One of TrendyWear’s flagship stores in New York generates $15 million in annual sales, but its rent has
increased to $5 million per year. The store’s total operating costs (including rent, staff, and inventory)
amount to $13 million per year.
What is the store’s operating profit margin?
(Enter a percentage value, e.g., "10")

(Question 11) - Future Growth Strategy

Which of the following strategies would be most effective in driving TrendyWear’s long-term growth?
(Select MULTIPLE answers)
A. Invest in AI-powered inventory management to reduce overstocking.
B. Expand heavily into new markets like Africa and Latin America.
C. Offer “subscription boxes” where customers receive curated outfits monthly.
D. Increase reliance on discounting to attract price-sensitive customers.

(Question 12) - Investment ROI Calculation

TrendyWear plans to invest $500 million in a new automated warehouse system, expected to generate an
additional $100 million in annual profit.
What will be the ROI (Return on Investment) of this investment?
(Enter a percentage value, e.g., "20")

This case covers multiple consulting skills: structuring problems, business judgment, quantitative
reasoning, and strategic thinking.
1. A
2. A, B
3. 9.5
4. B
5. 1.656
6. 2.55
7. A, B, C
8. A, B
9. A
10. 83
11. A, B
12. 20

Here's a new BCG Casey online assessment practice case for you:

Case: Vietnam Solar Solutions (VSS)

Context:
Vietnam Solar Solutions (VSS) is a fast-growing company that sells and installs rooftop solar panels for
residential and commercial customers in Vietnam. The company has seen strong demand, but profitability
remains a challenge.
The CEO has asked for BCG's help to improve financial performance while maintaining strong growth.

Part 1: Market Sizing & Revenue Analysis

1. The company sells 20,000 solar panel systems per year at an average price of $3,000 per system.
What is the annual revenue of VSS?
2. VSS aims to increase sales by 15% per year. How many systems will they sell in Year 2?
3. If they maintain the same price per system, what will be their projected revenue in Year 2?

Part 2: Cost Analysis

1. The cost per solar panel system includes:
o Production cost: $1,200
o Installation cost: $800
o Sales & marketing cost: $500
o Administrative cost: $300
What is the total cost per system?
2. What is the total cost for all 20,000 systems in Year 1?
3. What is the profit per system and total profit in Year 1?

Part 3: Profitability Improvement

1. VSS is considering outsourcing installation, which would reduce the installation cost by 25%. What
would be the new cost per system?
2. If VSS maintains the same selling price, what would be the new profit per system and total profit in
Year 1 with this cost reduction?
Part 4: Strategic Considerations
1. Beyond cost-cutting, what are three strategic actions VSS could take to improve profitability?
2. How might government incentives and regulatory changes impact VSS’s growth strategy?

Try solving this and let me know if you want hints or explanations! 🚀
Part 1:
1. Revenue: $ 60M
2. Volume Sales: 23K
3. Revenue (after increased): $ 69K
Part 2:
1. Cost/system: $ 2.8K
2. Total cost: $56M
3. Profit: $ 4M
Part 3:
1. New cost/system: 2.6M
2. Profit/system: $ 0.4K
Total Profit: $ 8M
Part 4:
1. three other strategies:
- Increase sale volume by reducing price/system.
- Invest on Marketing, which emphasizes the value proposition of Solar panel, attracting customers who are
directing to a greener lifestyle.
- Invest in distribution system and leverage after sale services like installment, maintenance, etc. to differentiate
customers experience compared to other competitors.
2. government incentives and regulatory changes can:
- Subsidiaries can help reduce production cost and lower price to reach more customers.
- Restrictions (for example: setting a ceiling price, limiting on the import of materials, etc) would lead to
smaller profit margin

- Optimize cost on other expenses like sourcing (renegotiate or change suppliers) or operational (can be reduce
the number of staffs)
- Decrease price to attract more customers, provide discounts for inviting new members
- Invest in leverage customer’s experience by speed delivery, etc.