Contest #13

At the end of March, an oil well was producing 50.5 m3 of oil per day and 72.1 m3 of water per day. Each month, the well's oil production decreases by 1.855% and water production increases by 2.011%. It costs $140,250 to operate this well each month, which including operator salary and amortization of equipment. Additional costs are $51.90 to process one cubic meter of oil and $15.50 to dispose one m3 of water. Oil price is expected to be $575.00 per m3. What is the expected loss in profit from March to April?

Solution to Contest #12

Bigby Co. & Figetz Inc. are manufacturing competitors. They each sell their widgets for $45.00 a piece. Bigby's fixed costs are $101,900 a month. Figetz's fixed costs are 21.1% lower than Bigby's. Per widget, Figetz has a variable cost of 25.75% of the sale price. The cost is 3.5 percentage points more than Bigby's variable costs.

Bigby's fixed costs = $101,900 per month.
Figetz's fixed costs = $101,900 x (1 - 0.211) = $80,399 per month.
Figetz's variable cost = $45.00 x 25.75/100 = $11.59 per widget.
Bigby's variable cost = $45.00 x ( 25.75 - 3.50)/100 = $10.01 per widget

Last month, Bigby produced and sold 5,123 widgets. Figetz produced and sold 145 more widgets than Bigby.

Bigby's profit = 5,123 x ($45.00 - $10.01) - $101,900 = $77,354
Figetz's profit = (5,123 + 145) x ($45.00 - $11.59) - $80,399 = $95,605

Who made more profit and what was the % difference from the manufacturer who made the lower profit?

Figetz earned 23.6% more profit than Bigby: ($95,605 - $77,354) / $77,354 x 100%