By Dr. Swapnil Sahoo · Published · About 5 minutes plus practice
A full order book is only the beginning
Tiffin Trail is a fictional lunch business. A lunch sells for ₹150 and costs ₹90 to make and deliver. Monthly fixed costs are ₹12,000. Its contribution is ₹60 per lunch, so 200 lunches cover those listed fixed costs: ₹12,000 ÷ ₹60 = 200.
The founder expects 250 orders and can deliver at most 300. At 250 lunches, contribution is ₹15,000 and the remainder after the listed fixed costs is ₹3,000. These are teaching assumptions, not a demand forecast or a complete set of business accounts.
Now the promotion changes the problem
A ₹120 promotional price leaves only ₹30 contribution. Break-even becomes 400 lunches. Even if all 300 available lunches sell, contribution is ₹9,000 and the result after the listed fixed costs is minus ₹3,000. More enthusiasm cannot create the missing kitchen capacity.
One alternative is a smaller discount; another is a lower variable cost supported by an actual supplier quote. Adding capacity has its own cost. The decision should compare those changes together rather than assuming the original ₹12,000 fixed cost still applies after expansion.
Ask what the model leaves out
Check founder labour, failed deliveries, spoilage, packaging and collection costs. Ask whether the volume is achievable in the same period as the costs. If price does not exceed variable cost, the usual fixed-cost break-even formula does not provide a positive-volume solution.
A calculator makes an assumption visible. Conversations, trials and records are needed to test whether that assumption describes the business.