Calculate Profitability with Different Pricing Schemes
Overview
This question evaluates proficiency in unit economics, break-even analysis, and pricing-scheme comparison for subscription products, testing business analytics and financial modeling skills relevant to the Analytics & Experimentation domain for a Data Scientist role.
Capital One
Jul 12, 2025, 6:59 PM
Data Scientist
Onsite
Analytics & Experimentation
50
0
Unit Economics and Break-even Analysis
Context
You are evaluating a subscription product’s unit economics. Assume all costs and revenues are monthly. Unless otherwise noted, fixed cost = 5/month. In the base plan, users pay per-GB. In the alternative plan, users fall into either a free tier or a paid tier.
Questions
- Base per-GB plan
- Given: 20 subscribers, 400, variable cost $5 per user.
- Task: Compute monthly profit.
- Scale scenario
- If subscribers double to 40 (same usage and costs), does the firm break even?
- Alternative two-tier plan
- Free tier: costs $1 per free user to serve (no revenue).
- Paid tier: fee 5 per paid user.
- Task: What paid-user percentage is required to break even? Provide the formula in terms of total users N. Also evaluate for N = 20 (same as part 1) for a concrete number.
Hint: Set up revenue and cost equations, then profit = revenue − total cost. For break-even, set profit = 0 and solve for the unknown.
Solution
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