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How to play Break-Even Dial

Each round describes a small business in one or two sentences and asks for a number: units to break even, a margin, a payback period. Drag the dial, or use the minus and plus buttons for fine steps, then press Lock it in.
You score by how close you are. Within 3% of the answer is a bullseye worth 10 XP. Within 10% earns 7 XP and within 25% earns 4 XP. After each round you see your estimate next to the real answer and the one-line calculation. Eight bullseyes in a row add a 20 XP bonus.

The one division that runs a business

The break-even point is the level of sales where a business makes neither a profit nor a loss. To find it you need three numbers: the fixed costs that do not change with sales, the price of one unit, and the variable cost of making or delivering that unit.
Price minus variable cost is the contribution of each sale: the amount left over to pay the fixed costs. So:
  • Break-even units = fixed costs ÷ contribution per unit.
  • Units for a target profit = (fixed costs + target profit) ÷ contribution per unit.
  • Break-even revenue = fixed costs ÷ contribution margin ratio, where the ratio is contribution ÷ price.

Margin is not markup

Buy at $80 and sell at $100 and the profit is $20. As a share of the price that is a 20% margin. As a share of the cost it is a 25% markup. The two words are used loosely in conversation, and mixing them up in a quote can cost real money.

Why a small discount needs a lot more volume

A discount comes straight out of the contribution. At a $100 price and a $60 cost, a 10% discount cuts the profit on each unit from $40 to $30. To earn the same total you need to sell a third more units, not a tenth more. That is the question to ask before any price promotion.
To run your own numbers, use the free finance calculators or read the finance guides. For a longer test of the same ideas, play Cash Flow Run.

Finance guides