Caracas Chronicles

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.)