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When does a new lab break even, and what does a price cut do?

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

Kaveri Diagnostics (a fictional lab chain in India) opens a central lab in Pune with fixed costs of INR 60 lakh (INR 6,000,000) a month for staff, rent and leased machines. The average patient pays INR 900 for their tests. Reagents, sample collection and transport cost INR 300 per patient. How many patients a month does it need to break even? What is its margin at 14,000 patients a month? A rival cuts prices; if Kaveri cuts its average price by 10 percent, what is its new breakeven?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Lab profit = (price per patient minus variable cost per patient) x patients, minus fixed costs
- Contribution per patient = price minus reagents, collection and transport
- Breakeven patients = fixed costs divided by contribution per patient
- Margin = profit divided by revenue at the expected volume
- Test the change: lower price, same costs

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Contribution per patient
What a strong candidate does: INR 900 minus INR 300.
Contribution per patient (INR): 900 - 300 = 600
Step 2: Breakeven patients a month
What a strong candidate does: INR 6,000,000 of fixed costs over INR 600 each.
Breakeven patients a month: 6,000,000 ÷ 600 = 10,000
Step 3: Profit at 14,000 patients
What a strong candidate does: 14,000 times INR 600, minus fixed costs.
Monthly profit (INR): 14,000 × 600 - 6,000,000 = 2,400,000
Step 4: Margin at 14,000 patients
What a strong candidate does: Profit over revenue of 14,000 times INR 900.
Margin (fraction): 2,400,000 ÷ (14,000 × 900) = 0.1905
Step 5: Breakeven after a 10 percent price cut
What a strong candidate does: Price falls to INR 810, so contribution falls to INR 510.
New breakeven patients a month: 6,000,000 ÷ (900 × 0.9 - 300) = 11,765

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

Kaveri should not match the price cut across the board, because a 10 percent cut lowers contribution per patient by 15 percent, from INR 600 to INR 510, and raises breakeven from 10,000 to about 11,765 patients a month. First, at 14,000 patients the lab earns a margin of about 19 percent, so it has room, but the cut would need about 2,500 extra patients a month just to stand still. Second, fixed costs do not fall with price. The risk of doing nothing is losing doctors and patients to the cheaper rival. As a next step, offer lower prices only on high-volume bundles (health check packages) and win volume through more collection points and home visits.

Risks a strong answer names: A price war can spread to the most profitable specialist tests; Volume growth needs more collection centres, which add fixed cost.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.

Next: another case in Partner mode

Swap roles and run the next case, so you both practise answering and scoring.

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