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Math Help - I buy and sell airtime online but need help with the numbers

  1. #1
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    May 2010
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    I buy and sell airtime online but need help with the numbers

    There's not much of a margin and I need to know if I am doing the right thing. I have tried to calculate this problem myself but have found it a bit hit and miss. I wonder if anyone can help. All prices are in Kenya Shillings (KSh) as I live and trade in Kenya. I sell airtime online (note to forum admin - if I was advertising I would probably post a link here).

    I buy airtime at 5.75% discount and sell it at 2% discount

    eg KSh 1000 airtime is bought at KSh 942.5 and sold at KSh 980

    The payment processor (a Local bank) take 3.5% of the sale price (the KSh 980).

    I want to be able to do all this without leaving the comfort of my office so can buy airtime remotely from a local company but that involves sending money by bank transfer at a charge of KSh 350, which wipes out a lot of profit.

    The thing is, this is a fixed cost, unlike the percentages previously mentioned.

    The questions is... what is the minimum I can transfer and still break even once that value of airtime is sold?

    I have tried putting in numbers and working through it by guesswork but I would be very impressed if someone could come up with a formula or something.

    Thanks


    *edit* Is it 109375 ?

    980-942.5 = 37.5

    980 x 0.035 = 34.3

    37.5 - 34.3 = 3.2

    350/3.2 = 109.375

    as that was an example using KSh1000 airtime the answer must be multiplied by 1000.

    Is that right?

    *edit (2)*

    If the above IS correct dropping the sales discount to 1% has a big impact on the amount I have to commit. Using the same calculations as above it means I now only have to transfer a minimum of KSh 27000 to break even....I think
    Last edited by MCMuckle; May 29th 2010 at 06:20 AM. Reason: Just thinking aloud...
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  2. #2
    MHF Contributor
    Joined
    Dec 2007
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    Ottawa, Canada
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    109,375 is correct: you break even (so no income tax!!)

    Use this formula:
    B = Break even (?)
    f = bank transfer fee (350)
    u = purchase discount (.0575)
    v = selling discount (.02)
    w = fee on selling price (.035)

    B = f / [u - v - w(1 - v)]

    B = 350 / [.0575 - .02 - .035(1 - .02)] = 109375
    Last edited by Wilmer; May 29th 2010 at 11:27 AM. Reason: Add formula
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