Product launch: can growth pay for the launch?
A fictional beverage brand plans a new product. The sales team forecasts a large launch, but the CFO needs a contribution and recovery analysis before committing funds.
Original Finance Circle commercial-finance scenario with fictional product data. McKinsey’s Electro-Light case is related public reading, not the source of these figures.
Independent Finance Circle learning material. The source organisation does not sponsor, author or endorse this exercise.
Clarify. Structure. Calculate. Defend.
Take 2 minutes to clarify the decision and definitions, 3 minutes to structure the analysis, then work the exhibits. Finish with a concise recommendation and answer a follow-up. The time is a suggested practice format, not an employer requirement.
Clarify before solving
What are the data basis and reporting boundary?
Original Finance Circle commercial-finance scenario with fictional product data. McKinsey’s Electro-Light case is related public reading, not the source of these figures.
Which assumptions can I use without requesting more data?
All amounts CAD. Net selling price is 4 per bottle; variable production cost is 1.60 and variable distribution cost is 0.40. Annual recurring fixed launch-support cost is 500,000. Time-zero launch investment is 300,000.
What decision am I expected to support?
A distributor asks for a 10% price reduction. Costs and fixed support stay constant. Calculate new unit contribution and operating break-even volume.
Build your structure
- Net unit price and variable contribution
- Recurring operating break-even
- Upfront investment recovery and downside volume
- Discount concession, demand and capacity
Use the branches that matter to this decision. A memorised framework is less useful than explaining why each analysis could change your recommendation.
Everything you need to work the case.
Assumptions & boundaries
- All amounts CAD. Net selling price is 4 per bottle; variable production cost is 1.60 and variable distribution cost is 0.40.
- Annual recurring fixed launch-support cost is 500,000. Time-zero launch investment is 300,000.
- Base sales are 300,000 bottles in year 1; downside sales are 220,000. Ignore tax, working capital and discounting.
Illustrative launch inputs
| Driver | Value |
|---|---|
| Net price / bottle | $4.00 |
| Production / bottle | $1.60 |
| Distribution / bottle | $0.40 |
| Annual fixed cost | $500,000 |
| Initial investment | $300,000 |
| Base volume | 300,000 bottles |
| Downside volume | 220,000 bottles |
Choose the responsibility. Solve the decision.
Each level uses the exhibits above and asks a different question. Your entries stay in this open page only; copy your work before leaving.
Calculate recurring economics.
Calculate unit contribution, base annual operating profit and recurring operating break-even volume.
Why is the initial investment excluded from operating break-even?
Numerical checks compare your arithmetic with the case model. Written recommendations are self-practice and are not automatically graded.
03 · Reveal worked solution & decision guide
Expected numerical answers
- Unit contribution
- 2 CAD / bottle
- Base operating profit
- 100,000 CAD
- Operating break-even volume
- 250,000 bottles
Work through the calculation
- Contribution = 4 − 1.60 − 0.40 = 2. Base profit = 300,000 × 2 − 500,000 = 100,000.
- Operating break-even = 500,000 / 2 = 250,000 bottles; it excludes the initial investment.
A strong concise response
My calculation shows that unit contribution is 2 CAD / bottle; base operating profit is 100,000 CAD; operating break-even volume is 250,000 bottles. Positive operating profit does not mean the launch investment has been recovered.
Answer the interviewer follow-up
Why is the initial investment excluded from operating break-even?
Operating break-even covers recurring operating costs. Recovering the opening investment is a separate cash-recovery target.
Assessment rubric · 20 points
For self-review or mentor discussion. This rubric is not an automated written-answer grade or an employer scoring system.
Correctly derives all 3 numerical results for this level, keeps signs and units consistent, and explains the method.
Explains the objective: Calculate recurring economics. States the supplied scope, timing and metric definitions before calculating.
Positive operating profit does not mean the launch investment has been recovered. Addresses the interviewer follow-up without contradicting the facts.
Leads with a clear conclusion, distinguishes facts from assumptions, and identifies the next evidence needed. Does not claim the source company asked or endorsed this question.
Use full precision until the final rounding. Alternative written recommendations may be reasonable if they respect the facts and explain assumptions. This is Finance Circle’s guide, not an official source-company answer.
Source & attribution
The references below identify the public reporting, hiring guidance, research or mock-interview material used for context. Finance Circle wrote the exercise and its answers. Illustrative figures are explicitly identified; they are not company results or findings.
Public context; Finance Circle’s scenario inputs are illustrative.
Source reviewed 30 October 2026. No external page is needed to answer this exercise. Company names and logos identify sources only. All trademarks belong to their respective owners.