Revenue Models and Costs — slides
Financial Literacy Club
Entrepreneurship · Lesson 5
Revenue Models and Costs
Fixed vs. variable costs, and finding your break-even point.
14-minute lesson · learnwithflc.org
Revenue Models and Costs · 1 / 20
Financial Literacy Club
Entrepreneurship · Lesson 5
Revenue Models and Costs
Fixed vs. variable costs, and finding your break-even point.
14-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Distinguish fixed from variable costs
- Calculate contribution per unit
- Calculate the break-even point
Warm-up
A food truck pays $1,500 a month for its parking spot no matter what. Is that fixed or variable? What about burger buns?
Think, then write your answer.
The big idea
Revenue Models and Costs
Fixed vs. variable costs, and finding your break-even point.
Entrepreneurship · Lesson 5
Fixed costs stay the same no matter how much you sell — equipment, a booth fee, website hosting. Variable costs rise with each sale — materials, packaging, payment fees.
Vocabulary
Contribution per unit
Price − variable cost per unit. It's how much each sale contributes toward covering fixed costs, and then toward profit.
Vocabulary
Break-even point
The number of sales needed to cover fixed costs: fixed costs ÷ contribution per unit. Below it, you lose money; above it, you profit.
Entrepreneurship · Lesson 5
Your revenue model is how and when customers pay: one-time purchases, subscriptions, memberships, or a mix. Recurring revenue is more predictable — and makes break-even easier to plan.
Entrepreneurship · Lesson 5
Know your number
Every founder should be able to answer: "How many sales do I need this month to break even?"
See it
20 pairs: revenue $240, total costs $400, profit −$160. 43 pairs: revenue $516, total costs $515, profit $1. 80 pairs: revenue $960, total costs $700, profit $260.
| Revenue | Total costs | Profit | |
|---|---|---|---|
| 20 pairs | $240 | $400 | −$160 |
| 43 pairs (break-even) | $516 | $515 | $1 |
| 80 pairs | $960 | $700 | $260 |
Real example
Marcus finds his break-even
- Fixed costs: $300 a month (a weekend market booth, supplies kit, and a few ads).
- Price: $12. Variable cost: $5. Contribution: $7 per pair.
- Break-even: $300 ÷ $7 ≈ 43 pairs a month.
Every pair after the 43th adds $7 of profit. Marcus also starts a "Clean Club" — $30 a month for 3 cleans — so part of his revenue is locked in before the month starts.
Try it together
Try it: break-even calculator
Start with Marcus's numbers, then change the price. Notice how much a few dollars moves the break-even point.
Your numbers
Costs you pay no matter how much you sell: rent, subscriptions, equipment.
What each sale costs you: materials, packaging, fees.
Results
Units to break even each month
43
That's $516 in sales
Profit per unit (contribution)
$7.00
Contribution margin
58%
of each sale covers fixed costs and profit
Every sale after unit 43 adds about $7.00 of profit.
Educational calculator, not financial advice. Results are hypothetical estimates based on the numbers you enter.
Activity · pairs · 10 min
Break-Even Race
- A student sells bracelets for $8 each. Each costs $3 to make, and fixed costs are $200 a month.
- Pairs calculate contribution per bracelet and the break-even point, then check with the break-even calculator.
- Change one thing at a time: raise the price to $10; then instead cut fixed costs to $150.
- Pairs decide which change helps more and why.
Check for understanding · 1 of 3
Fixed costs are $500 a month. You sell a product for $15 that costs $5 to make.
How many sales do you need to break even?
- A25
- B34
- C100
- D50
D. 50
Contribution = $15 − $5 = $10. Break-even = $500 ÷ $10 = 50 sales.
Check for understanding · 2 of 3
Which is a variable cost for a T-shirt business?
- ABlank shirts for each order
- BA yearly website subscription
- CA heat press bought once
- DA monthly booth fee
A. Blank shirts for each order
Blank shirts are bought per order, so they rise with sales. The others stay the same regardless of volume.
Check for understanding · 3 of 3
Raising your price (with the same costs) lowers your break-even point.
- True
- False
True
A higher price increases contribution per unit, so you need fewer sales to cover fixed costs.
Remember
Key takeaways
- Fixed costs stay put; variable costs grow with sales.
- Contribution = price − variable cost.
- Break-even = fixed costs ÷ contribution.
- Recurring revenue makes planning easier.
Discuss
Talk it over
- Would you rather have high fixed costs and low variable costs, or the reverse? Why?
- What business could you turn into a subscription?
Exit ticket
Write the break-even formula.
Answer on your exit ticket before you leave.
Nice work today.
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