For this exercise, assume:
- You have a $28 million budget for transport.
- The maximum payload of the Boeing 777 you’re using is 102 tons.
- The distance between Buenos Aires and Caracas is 5086 km.
- The marginal cost (in terms of extra jet-fueled burned) of transporting one ton of cargo over 1000 km. is $91.
- The fixed cost of flying a 777 Freighter one-way between Caracas and Buenos Aires is $55,000.
- Your plane always goes back from Venezuela to Argentina empty.
On that basis, calculate how much of the $28 million transport budget you can stow away in your own personal offshore account.
If you calculated that your 777 would have to do
- 6556 tons / 102 ton maximum payload = 64.3
65 round-trips (rounding up) between Caracas and Buenos Aires, incurring fixed costs of:
- 65 round-trips x 2 legs per trip x $55,000 per leg = $7,150,000
and variable costs of:
- $91 per ton per 1000 km. x 6556 tons x 5.086 thousands of km. = $3,034,287
for a total cost of $10,184,287 and, considering you had $28 million for transport, you deduced this means you can pocket a cool seventeen million eighthundred and fifteen thousand sevenhundred and thirteen bucks…then you’re wrong.
It was a trick question: the milk never actually made it onto the plane in the first place.
You get to pocket the full $28 million!
(Extra credit if you remembered that you can pocket the $39 million price of the milk itself, too.)
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