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Financial Literacy Club

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Entrepreneurship · Lesson 5

Revenue Models and Costs

Part A. Vocabulary

Define each term in your own words.

Contribution per unit

Break-even point

Part B. Guided notes

Fill in each blank using the word bank.

Word bank: contribution · planning · price · variable

  1. Fixed costs stay put; costs grow with sales.
  2. Contribution = − variable cost.
  3. Break-even = fixed costs ÷ .
  4. Recurring revenue makes easier.

Part C. Check your understanding

Circle the best answer.

  1. Fixed costs are $500 a month. You sell a product for $15 that costs $5 to make.

    1. How many sales do you need to break even?

    • A. 25
    • B. 34
    • C. 100
    • D. 50

  2. 2. Which is a variable cost for a T-shirt business?

    • A. Blank shirts for each order
    • B. A yearly website subscription
    • C. A heat press bought once
    • D. A monthly booth fee

  3. 3. Raising your price (with the same costs) lowers your break-even point.

    True/False

Part D. Apply it

Show your work.

  1. 1. Price $15, variable cost $6, fixed costs $450 a month. What's the contribution per unit and the break-even point?

  2. 2. Why is recurring revenue (like subscriptions) easier to plan around?

Part E. Think about it

Answer in complete sentences.

  1. 1. Would you rather have high fixed costs and low variable costs, or the reverse? Why?

  2. 2. What business could you turn into a subscription?

Exit ticket

Name

Write the break-even formula.