How many coffees a day does this new outlet need to sell to break even?

• That you state the formula before the numbers. Saying "I will divide monthly fixed costs by the margin per coffee" shows you know where you are going and lets the interviewer follow.
• That you separate fixed and variable costs properly. Rent and salaries do not depend on the number of coffees sold. Coffee, milk and the cup do.
• That you keep units consistent. Fixed costs per month and an answer expected per day call for a conversion, done explicitly.
• That you comment on the result. A number of coffees per day means nothing until it is related to opening hours or footfall.

1. 1

   Ask for the missing data

   You need the average selling price, the variable cost per unit and the fixed costs over a given period. If the interviewer does not supply them, propose assumptions and get them validated.
2. 2

   Calculate the unit margin

   Selling price minus variable cost. That is what each sale contributes towards fixed costs.
3. 3

   Divide and convert

   Fixed costs divided by unit margin, then conversion into the unit asked for, here per day.
4. 4

   Check and conclude

   Relate the result to something concrete, then say what it means for the decision.

"To find break-even, I will divide the outlet's fixed costs by the margin each coffee brings in. You gave me 15,000 euros of fixed costs a month, between rent and salaries, an average selling price of 3.50 euros and a variable cost of 1 euro per coffee. So the margin per coffee is 2.50 euros.

15,000 divided by 2.50 gives 6,000 coffees a month. If the outlet is open thirty days, that is 200 coffees a day. To judge whether that is realistic, I bring it down to the hour: over ten opening hours it is twenty coffees an hour, or one every three minutes on average. In a station or an office district that seems achievable to me, with peaks in the morning. On a quiet street it would be a lot. So my next question would be about footfall at the site."

This example is made up: it shows the tone and the construction, not a script to memorise. Your answer has to come from your own experience or from the data the interviewer gives you.

• Dividing fixed costs by the selling price instead of the unit margin. It is the most common error and clearly understates the volume needed.
• Mixing periods: monthly fixed costs, daily sales, and no conversion between them.
• Giving the figure and stopping. With no sanity check and no implication for the client, you have done a calculation, not an analysis.
• Diving in silently. If you slip without having announced your method, the interviewer cannot tell where, or help you.