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The figure a decision's numbers settle, the one further figure it still needs, which figure answers which question, a contract's cash worked to its low point, and a contract judged net of the capacity it uses.
Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.
You will work out what a decision's figures settle, name the one further figure it still turns on, match each question an owner asks to the figure that answers it, work a contract's cash month by month to its low point, and judge a contract net of the extra capacity it forces.
Every lesson of this course has produced a figure: contribution, relevant cost, the binding constraint, a forecast's low point, the assumption that could overturn a plan. A real decision rarely needs all of them. It needs the right two, and the skill is noticing which one is missing.
| Term | What it means |
|---|---|
| Settles | A figure settles a question when no plausible change to it would change the answer. |
| Missing figure | The one the decision still turns on. |
| Conditional decision | A choice that says what would have to be true for it to hold. |
| Low point | The lowest the account falls with the decision in the forecast. |
The Town Hall offers Corner Bean a contract: sixty lunches a day at 6.50 a plate, ingredients and packaging 3. Over twenty days that is 1200 plates, and (6.50 − 3) × 1200 = 4200 dollars of contribution a month. The rent and the insurance are paid either way, so the 4200 is real, relevant and large.
It looks settled. It is not, because the kitchen is already at its limit at the lunchtime peak. Sixty more lunches by noon is a capacity question, and 4200 cannot answer it however carefully it is worked out. If the kitchen cannot make them, the contract earns nothing and costs a customer's trust.
So a decision has three parts:
The missing figure is almost always one of four: the contribution rather than the revenue, the costs that actually change, the capacity at the constraint, or the date the cash moves.
Another way: table
Five decisions and the figure each still needs.
| Decision | Settled | Still missing |
|---|---|---|
| Town Hall lunches | 4200 contribution a month | Kitchen capacity at noon |
| Delta Couriers' fleet repairs | 880 contribution a month | Cash timing: 60 days in, 30 days out |
| Herbs instead of salad | 1000 more revenue a season | What herbs cost to grow and pick |
| Closing on Mondays | 340 lost above wages and power | Which other costs stop |
| Bulk screens | 1000 saved over five months | Whether the account can be 5000 down |
Each missing figure belongs to a different lesson of the course.
Another way: steps
One question. Write the decision as a single yes-or-no question: take the contract, close on Mondays, place the bulk order. A decision that is really two decisions is taken as two.
Settle. Work out what the figures on the table settle, and say what it is: a contribution a month, a saving over a season, a loss a day.
Name the missing figure. Run down the four: is this revenue or contribution? Are these all the costs that change? Can the business physically do it at the constraint? When does the cash move? The first one the figures on the table cannot answer is the missing figure.
Fetch it. Each has its tool from the course: contribution per unit, the relevant-cost list, the constraint and its capacity, the cash forecast's low point.
Decide. Yes, no, or yes provided that.
To check a decision, give it to someone who was not there and ask them which figure would change it. If they name a figure the decision did not look at, it was not finished.
The Delta contract settles at 880 dollars of contribution a month, and its missing figure is timing: parts are paid a month after each month's repairs and Delta pays two months after. Working it month by month turns a vague worry into a number.
At forty repairs a month, parts cost 1920 and Delta pays 2800. Month one: nothing moves. Month two: 1920 out, nothing in — the running effect is −1920. Month three: another 1920 out and the first 2800 in, so −1040. Month four: −160. Month five: +720. The contract's low point is −1920 at the end of month two, and it does not pay its way in cash until month five.
That figure goes into the forecast. If the account's usual low point is 2500 and the buffer is 1000, 1920 more takes it below the floor, and the decision becomes yes, provided Delta pays at thirty days, or the line of credit covers two months.
A figure worked to the cent feels finished, and that feeling is the trap. Fixit Mobile's bulk order saves exactly 1000 dollars over five months; it also takes 5000 out of the account on day one, and whether the business survives that depends on the forecast's low point, which the 1000 knows nothing about.
So end every decision in a sentence of the form on these figures, yes (or no), provided that…, and put the missing figure after provided that. A decision written that way can be checked, handed to someone else, and revisited when the missing figure arrives.
This is how to work the figure out and read it, not a recommendation about what any business should do. That depends on a market and on rules nobody here can see.
A decision is a forecast, and like any forecast it should be checked against what happened. Three months after taking the Delta contract, Dan puts the figures he decided on beside the real ones: repairs a month, parts a repair, the date Delta actually paid. Where the real figure differs, he asks whether it would have changed the decision. Most differences will not; the one that would is the figure to watch hardest next time. That is the monthly review of the last lesson turned on a decision rather than a month.
Long Row Gardens' herbs look like 1000 dollars more a season: four beds, each earning 1250 from herbs against 1000 from salad. That is a revenue comparison, and the missing figure is what each crop costs to grow, pick and pack.
Tomasz fetches it from last season's records. A bag of salad costs about 2 dollars, so a salad bed contributes 200 × (5 − 2) = 600. A bunch of herbs takes longer to pick and needs sleeves and ties: about 1.50, so a herb bed contributes 500 × (2.50 − 1.50) = 500. On contribution the change loses 4 × (500 − 600) = −400 a season, the opposite of what the revenue said.
The lesson is not that herbs are a bad crop. It is that a comparison made on revenue was not a comparison at all, and one figure turned the answer round. If Tomasz can bring the picking cost of a bunch down to a dollar, the herb bed contributes 750 and the change gains 600 — so the condition in his decision is the picking cost, and that is the figure he tests on one bed first.
A conditional decision is only useful if the condition can be checked. Yes, if it works out is not a condition. Yes, provided the kitchen can prep sixty more plates by eleven-thirty on a trial Tuesday is: it names the missing figure, the level it has to reach, and how and when it will be measured. When the condition is met the decision is made; when it is not, the owner already knows why the answer is no.
A condition should also say who checks it and by when, because a decision left waiting on a figure nobody is fetching is a decision not taken. Dan's condition on the Delta contract reads: yes, provided the bank confirms by Friday that the line of credit will cover 2000 for two months. By Friday he knows, and so does anyone else who reads the note, which is the point of writing it down.
A two-person print shop was offered a contract by a school trust to print every newsletter, program and exam paper for its six schools: roughly 9,000 dollars of work a term. The owners worked out the contribution first. Paper and toner came to about 45 percent of the price, so the contract would contribute around 4,950 a term. Rent, insurance and the presses were paid either way. On that figure the answer was an easy yes.
They then went down the four missing figures. Contribution: done. Costs that change: the trust wanted delivery to six sites, which meant a van day each week, about 60 dollars a time over thirteen weeks — 780 a term. Capacity: exam papers came in the same three weeks as the shop's busiest wedding season, and the finishing machine could not do both. Timing: the trust paid sixty days after each term's invoice.
Capacity was the figure that decided it. They fetched it by asking the trust for the exam dates and laying them against their own bookings, and found two weeks of overlap. Their answer was conditional: yes to everything except the summer exam papers, or yes to everything if the trust would send the exam files three weeks early. The trust agreed to the early files, the contract ran for four years, and the sixty-day terms were covered by the line of credit the owners had arranged before signing.
When a small business asks a bank to back a new contract, the bank's questions follow the same four figures: what it contributes, what new costs it brings, whether the business can deliver it, and when the customer pays. An owner who has already answered all four has usually already made the decision well.
A precise-looking total always settles the choice. It settles the question it answers, and no other.
More figures make a better decision. The right missing one does; the rest is noise.
Revenue gained is money made. Only the contribution is, and only if the costs that change are counted.
A contract that contributes every month helps cash every month. Not until its money arrives.
If the figure is missing, do not decide. Decide conditionally, and say what would change it.
Write the decision as one question.
$\text{close on Mondays, or not}$
One question at a time.
Settle what the figures settle.
$600 - 240 - 20 = 340$
Takings less the wages and power that stop.
Name the figure still missing.
$\text{which other costs stop}$
Rent and insurance do not; ingredients do, and are not on the list.
Fetch it from the invoices.
$\text{Monday ingredients} \approx 210$
The relevant cost the list left out.
Decide on the full figures.
$340 - 210 = 130 \text{ lost a Monday: stay open}$
Still a loss to close, though a smaller one.
Settle the contribution.
$(70 - 48) \times 40 = 880$
A month, once it is running.
Name the missing figure.
$\text{parts out at 30 days, Delta in at 60}$
Timing.
Run month two.
$0 - 1920 = -1920$
Parts paid, nothing in yet.
Run month three.
$-1920 - 1920 + 2800 = -1040$
Delta's first payment arrives.
Run months four and five.
$-1040 + 880 = -160; \quad -160 + 880 = 720$
Ahead only in month five.
Decide, with the condition written in.
$\text{yes, if the account can carry } 1920$
The low point goes in the condition.
Settle the contribution.
$(6.50 - 3) \times 1200 = 4200$
Sixty plates a day for twenty days.
Name the missing figure.
$\text{spare kitchen capacity by noon}$
The kitchen is at its limit at the peak.
Fetch it: count the spare prep.
$40 \text{ plates a day}$
What the current team can add by noon.
Work the contract at forty a day.
$3.50 \times 40 \times 20 = 2800$
If the Town Hall would take forty.
Cost a morning cook for all sixty.
$1200 \text{ a month}$
A cost that exists only because of the contract.
Work the contract at sixty with the cook.
$4200 - 1200 = 3000$
More than the 2800 at forty.
Decide, with the condition written in.
$\text{yes at sixty, provided the cook is hired first}$
The capacity figure is now in the decision.
Find what the bulk order saves.
$5 \times 200 = 1000$
Saving a screen times the screens.
Find the cash it takes today.
$25 \times 200 = 5000$
All paid on day one.
Name the missing figure.
Fixit Mobile must decide whether to buy two hundred screens at 25 each instead of forty a month at 30. The figures so far: Saving a screen, $5$; Screens in the bulk order, $200$; Cash the order takes now, $5000$. The owner wants this figure next. Saving over the five months the order lasts: how many dollars?
Answer:
Complete the worked solution: a caterer is offered $210$ meals a month at $11$ dollars, with ingredients of $3$ a meal. Taking it means paying a cook for extra hours costing $700$ a month. Settle what the figures settle.
Take the cost from the price.
$11 - 3 =$ u
Contribution a meal.
Multiply by the meals.
$(\text{contribution a meal}) \times 210 =$ t
Contribution a month.
Take off the extra hours.
$(\text{contribution}) - 700 =$ n
A cost that exists only because of the contract.
Name the figure still missing.
$\text{when the customer pays}$
The figures say nothing about the cash's timing.
Decide, with the condition written in.
$\text{yes, provided the low point stays above the buffer}$
The missing figure goes in the condition.
Four questions an owner asks about any money decision. Match each to the figure that answers it.
| The forecast's lowest balance with the decision in it | Contribution against the costs that actually change | The capacity left at the binding constraint | The one assumption whose change would overturn it | |
|---|---|---|---|---|
| Can we afford it? | ||||
| Is it worth doing? | ||||
| Can we physically do it? | ||||
| How sure can we be? |
Corner Bean must decide whether to close on Mondays. The figures so far: Monday's takings, $600$; Monday's wages, $240$; Monday's power, $20$. From these, What a Monday brings in above the costs that would stop comes to $340$ dollars. What else does the decision still need?
Delta Couriers offers Fixit Mobile $44$ repairs a month at $70$ dollars, starting in month one. The parts and fees, $48$ a repair, are paid to the supplier a month after the repairs; Delta pays two months after. Fill in the contract's running effect on cash at the end of each month, in dollars, with a minus sign below zero.
| Amount | |
|---|---|
| End of month two | |
| End of month three | |
| End of month four | |
| End of month five |
Delta Couriers' contract would bring Fixit Mobile $33$ repairs a month at $70$ dollars each, with $48$ of parts and fees in each. The bench is full, so taking it means paying a technician for extra hours costing $400$ dollars a month, which would not be paid otherwise. How many dollars a month does the contract add? Write a loss with a minus sign.
Answer:
A small bakery is offered a wedding order worth $1400$ dollars, due on a Saturday in six weeks, with ingredients costing $50$ percent of the price, all bought two weeks before. The couple pays a quarter as a deposit on booking and the rest on the day. The order needs $3$ hours of oven time, and the usual Saturday bake leaves $2$ of the oven's hours free. Fill in the decision's figures, in dollars and hours.
| Amount | |
|---|---|
| Contribution from the order | |
| Deposit on booking | |
| Ingredients less deposit | |
| Oven hours short that Saturday |
Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.
Long Row Gardens could turn 4 beds from salad to herbs. A bed of salad sells 200 bags at 5 dollars, and a bag costs $3$ dollars to grow, pick and pack. A bed of herbs sells 500 bunches at 2.50, and a bunch costs $1$ dollars. By how many dollars a season would the change move contribution? Write a fall with a minus sign.
Answer:
You can take a money decision as far as its figures go, fetch the figure it still needs, and say exactly what would change it. Tell someone why a figure worked to the cent can leave the decision wide open. That is the end of the course: cash, costs, capacity and forecasts, used together.
17. Your turn: 200 screens at 25 instead of 40 a month at 30, step 3
$\text{the forecast's low point, 5000 lower}$
The saving says nothing about surviving the day it is paid.