Case Math · Interview Question
Client can cut variable cost per unit by $5 on a product selling 200K units. Profit impact, and what to check?
How to answer
It drops straight to the bottom line: $5 x 200K = $1M of additional annual profit, assuming volume and price hold. Before recommending, I'd confirm the cut doesn't hurt quality or volume and doesn't require an upfront investment needing its own payback test. If it's clean, $1M is the run-rate benefit.
Key idea: Reporting the $1M as a one-time figure rather than annual run-rate, or ignoring that quality/volume effects can erode the savings.
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