Can your small business cover its costs?
Use contribution margin to calculate break-even sales and test demand risk.
Materials: calculator page, paper or this response sheet, and a basic calculator. “Keep for comparison” preserves up to three scenarios while that calculator tab stays open.
Prepare the fictional setup
Click “Load example” in the calculator before starting. The first scenario is fictional and may intentionally show a difficult financial outcome.
Complete setup reference
| Selling price per unit or job ($) | 100 |
|---|---|
| Variable cost per unit or job ($) | 40 |
| Expected sales per month | 150 |
| Monthly fixed operating costs ($) | 5000 |
| Monthly owner-pay goal ($) | 3000 |
| One-time startup / opening inventory costs ($) | 20000 |
| Cash available before launch ($) | 35000 |
| Target runway (months) | 6 |
Typed responses stay in this tab. Save a PDF to keep your work. Do not enter real household or student financial information.
Warm-up · 5 minutes
Why is revenue from one sale different from profit on that sale?
Investigate · 25–40 minutes
Step 1
Load the startup example: $100 sale price, $40 variable cost, $5,000 monthly fixed costs and $3,000 owner-pay goal.
Step 2
Calculate contribution per sale and the minimum whole number of monthly sales needed to break even.
Step 3
Compare 150 sales with 120 sales. Record the surplus or shortfall in each case.
Step 4
Keep the scenario. Raise the unit price to $110 but reduce sales to 120. Decide whether the trade-off improves the result.
Discuss & reflect · 10 minutes
Why might raising a price reduce the number of sales?
Extension
Design a fictional craft stall with a $15 product. Choose realistic costs, solve break-even, and identify a capacity constraint.
Teacher guide and assessment
Expected reasoning
Contribution is $60. Break-even is $8,000 ÷ $60, rounded up to 134 sales. At 150 sales surplus is $1,000; at 120 it is −$800. At $110 price, $40 variable cost and 120 sales, surplus is $400.
Use the calculator’s breakdown to check rounding. The teacher explanation is tied to the fictional setup above, not to any learner’s edited scenario.
Quick assessment · 6 points
- 2 points: accurate calculations with units and labeled scenarios.
- 2 points: explains how changing one assumption changes the result.
- 2 points: supports a conclusion with evidence and names a limitation.
Support: work through one scenario together and use a simple table. Challenge: ask the learner to find a counterexample or solve a target by hand. These are flexible suggested grade bands, not a standards-alignment claim.
Methods & sources
Formula explanations, assumptions and source links are on the calculator page. This is an educational activity, not a recommendation to borrow, invest or make a purchase.