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Medium Profitability Break-even Analysis profitability break-even analysis

Drone Delivery

#Logistics/Technology #Technology #Logistics #Healthcare #logistics #drone technology #healthcare delivery
ProHub Comment

This is a straightforward break-even analysis case requiring the candidate to calculate contribution margin (price minus variable cost) and divide fixed costs by contribution margin. The case tests foundational profitability modeling and rewards candidates who contextualize the results against market size and competitive dynamics.

Estimated Time 15 minutes
Difficulty Medium
Source PeterK
50 / 100
Skydrop produces unmanned delivery drones and performs delivery of critical supplies (e.g. medicine) to U.S. remote areas. They consider two scenarios in their development. What’s the break-even number of deliveries per distribution center for each scenario?

Clarifying Information

  1. Exhibit 1. Average Unit Delivery Cost, USD, 2023
  2. The fixed costs of a distribution center is $1.3M per year
  3. Skydrop currently charges $20 per delivery and plans to drop the price to $5 per delivery under Scenario 2
  4. The client would like to know the break-even number of deliveries per year
  5. Exhibit 1 provides an exhaustive overview of variable costs