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Chart · Break-Even

Worked Example: Accepting an Order with Displaced Work

Follow an additional order from revenue through setup and displaced contribution, then separate its incremental profit from payment timing.

By PriceAndProfit Editorial Updated

A producer has an offer for 200 additional units at $18 each. Incremental materials and delivery cost $11 per unit. The order also requires $500 of setup work and occupies capacity that would have generated $300 of contribution from another customer. This worksheet compares accepting the order with declining it. It deliberately keeps accounting profit for the whole company separate from this one decision.

Incremental result = 200 × ($18 − $11) − $500 − $300 = $600
Hypothetical inputs and independently checked arithmetic
StepCalculationAmount
Additional revenue 200 × $18 $3,600
Incremental unit costs 200 × $11 −$2,200
Setup caused by order Separate quote −$500
Contribution forgone Other order after avoidable costs −$300
Incremental result $3,600 − $2,200 − $500 − $300 $600
Required revenue for zero incremental result $2,200 + $500 + $300 $3,000
Minimum offer per unit $3,000 / 200 $15.00

Interpret the result

The modeled $600 improvement does not mean the order deposits $600 in the bank immediately. If the customer pays next month and the $2,700 of physical costs are paid now, current cash falls $2,700 before any deposit. The $300 forgone contribution is not a current cash payment; it represents the alternative result sacrificed. With a $1,000 deposit paid now, the immediate cash movement from the modeled order becomes minus $1,700, with the rest of the sale still uncollected.

Check before applying the example

If displaced contribution rises to $1,000, incremental result becomes minus $100 and the minimum offer becomes $18.50. If no work is displaced, incremental result becomes $900. Neither variation proves feasibility: confirm the promised delivery date, the setup scope and whether the customer would accept another price. Exclude sunk quotation effort from the incremental decision, but retain it in a complete project profitability review.

Use your own inputs

The calculator uses the same stated decision boundary.

Method reference: OpenStax: Special Order Decisions. Checked October 22, 2026. Incremental cost and capacity concepts only; no legal pricing rules or market prices are asserted.

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