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Hi there
I was working on question 4a of the Rail Co specimen paper and got stuck when reviewing the answer. I would be grateful if you could please help me understand:
1) How they calculated the annual preventable fraud figure for the areas without ticket barriers and
2) Where they got the figure that the fraud would be 12% of the annual revenue. Was it 540 / 4100 (per exhibit 3)?
I spent ages trying to work it out and tried to look online to find out but had no luck!
Thank you in advance!!!
The sheet shows assumed level of unpreventable fraud as 1.28, which is the average of fraud rates at the stations with barriers. Preventable fraud for stations with no barriers is total fraud rate less unpreventable fraud. So for Town C 8 – 1.28 = 6.72.
Sorry, but after playing around with some figures eg
Total monthly revenue should be: 28k x 59 + ……..27k x 62 etc
I haven’t managed to get 12% either.
Hi Ken – I understand where the 6.72% for example comes from for Stations C, D, G and I but don’t know how they got the below values in the final column.
If I take town C for example, it would be 22K x 44 per what you highlighted how the total monthly revenue is calculated. But how does it go from 11,616,000 (968, 000x 12 presumably) to 3,903,953? How does it work with the 6.72%? My other thought was whether you have to use the 6.72% to work out the new variance over the total population and then multiply that by spend and 12 (i.e. 7,392 for C x 44 x 12 = 3,902,976) but the numbers are slightly different.
3,903,953 – Station C
7,470,856 – Station D
10,456,776 – Station G
5,298,752 – Station IOn the second part, good to know I’m not going crazy! I did the same method as you and did not get 12%.
For C, I would have said:
Annual revenue expected, based on population and assuming no fraud is
12 X 110,000 X 0.28 X 44 = 16,262,400Of this 6.72% is lost because of preventable fraud ie 6.72% x 16,262,400 = 1,092,833.
So, I do not come near their answer.
All I can say is not to spend more rime on this. Your questions will be different!
Hi Ken – Thanks for sharing how you would approach it. I guess I thought it was worth understanding in case we get a similar question but I hope we do not! I also thought the question was more about challenging the assumptions versus the numbers so hopefully not understanding that part wouldn’t have been a big issue.
Thanks again.
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