Thursday, July 6, 2017

Break Even Points

Analytics, Chart, Data, Graph, MarketingI got to wondering about cost per units, breakeven points, and profit.  This takes things one step further than just figuring out cost per unit of objects when shopping.

The reality is: we do teach these as linear equations in general but we provide the formulas and we ask the questions.  We seldom let them explore equations to find the information themselves. 

I do not believe most of my students have a good understanding of breakeven points or of the equation itself.  They can identify the parts but I think they can do the math without really understanding the topic.

I plan to create a short unit where I have students research the cost of purchasing a game app.  There are several websites where a person can purchase the script for a game with the understanding they will make a few changes so they are not simply reselling the original game.  This is part of the startup cost.  Next they have to figure out how much they want to sell the new app for so they can find the rest of equation so they can calculate the number of units they need to sell to find breakeven point. 

Once they have the breakeven point, I will throw in the idea they do not get all of the money every time an app is sold.  I want to introduce they pay a percentage to apple store or google store for them to handle all purchases so the return they actually get is less than what they charge so that might change the cost per unit and change the breakeven point.

This is important because my students have no knowledge of how a person decides the unit cost especially when looking at a product such as a game app for mobile devices.  My students think they get to keep every bit of money the app is sold for.  In addition the start up cost means very little to students out in the Bush of Alaska because most people who start a business do so in an old abandoned building or use part of a room.  They don't see any of that as part of the start up cost.

Once the students have the new equation and breakeven point, I want to throw in the idea of having to add more games because most games have a length of interest before people want to move on to another game.  I honestly believe this will make the idea of cost, revenue, and breakeven more relevant and understandable.  Let me know what you think.