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Hello sir
If Volt Co sets a price to earn an operating margin of 40% over the life of a wind station, what will be the total lifetime profit per station (to the nearest $m)?
A $35m
B $408m
C $560m
D $933mCould not understand why operating cost divided by 60% as operating cost is given as $40000.
Why it could not be cost @60% = 40000
margin @ 40% = 40000*.40/.60. Why did it be $40000/.60. Then subtracted from life cycle cost of $55000.sir, please advise.
If the margin is 40% then for every $100 revenue the profit is 40 and therefore the costs must be $60. Therefore the revenue must be $100 for every $60 of costs.
Wind station
A wind station can generate 1,750 gigawatts of electricity per year. It has a life-cycle cost of $55,000 per gigawatt and an average operating cost of $40,000 per gigawatt over its 20-year life.
sir, I understood the above concept. But the operating cost is already given as $40000. So I doubt why cannot we equate 60% to $40000. So that the margin can be 40% which comes around $26667. Therefore, $26667*1750*20 = 933 m. But answer is given as $408m.
$40000/.60 = $66667- $55000 =$11667*1750*20 = $408m.
quite confused…
SIR JOHN!!you haven’t yet responded to my question but replied to everyone else please clear my doubt too. I wouldn’t ask if I didn’t need your help sir come on!
Don’t be impatient – I reply to questions in the order in which they are posted.
And don’t ever tell me to ‘come on’. You should be grateful that someone is prepared to answer your questions free of charge and not be rude.The operating cost is $40,000.
An operating margin is the profit as a % of the sales.If the profit is 40% of the sales then the cost must be 60% and so the selling price must be $66,667 per gigawatt.
However the full lifetime cost is $55,000 per gigawatt (the lifetime cost includes all costs, not only the annual operating cost- that is the whole point of life-cycle costing), and so the lifetime profit per gigawatt is 66,667 – 55,000 = $11,667.
I’m sorry sir but didn’t want to sound rude I saw you replied to every doubt except mine and I don’t have anyone else to ask
Thank you for everything and I genuinely apologize
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