Worked case · Problem Solving & Consulting · Intermediate

Profitability cases, worked through: the profit tree in practice

“Profits are falling, why?” is the most common case of all. Walk through a full worked case, then diagnose a gym chain’s promotion against the clock.

Metanoia Editorial · 9 Oct 2026 · 9 min

Profitability cases, worked through: the profit tree in practice

What is happening

Profitability cases ask why a business earns less than before, or less than it should, and what to do. The backbone is simple: profit equals revenue minus costs; revenue equals volume times price; costs split into variable costs that move with volume and fixed costs that do not. The skill is not the tree, which every candidate knows. It is using it to find where the change actually happened and why.

Strong candidates do three things weak ones skip. They compare against a baseline (last year, a competitor, a plan) so that every number means something. They segment before concluding, because an average hides the product, channel or region where the problem lives. And they move from where to why: a cost line that grew is a symptom; the reason it grew is the finding.

Why it matters

Profitability logic appears in most business cases even when the question is about growth, pricing or entry. Mastering it once pays off in every case type.

The framework

The profit tree, used well

Confirm the measure and the baselineProfit or margin? Compared with what period or peer?
Split revenue and costs, then quantify each changeFind which side moved more, in rupiah, not adjectives.
Drill the bigger moverRevenue: volume, price, mix. Costs: variable per unit, fixed totals.
Segment before concludingBy product, channel, region or customer type.
Ask why, then recommendName the root cause and two or three actions with their likely size.

Worked example

Roti Senja, a bakery chain whose margin halved in a year

The facts. Revenue rose 5%, from Rp 120 bn to Rp 126 bn, yet profit fell from Rp 18 bn to Rp 12.6 bn, so margin dropped from 15% to 10%. Costs rose from Rp 102 bn to Rp 113.4 bn, an increase of Rp 11.4 bn against only Rp 6 bn of extra revenue. The problem is on the cost side.

Drilling the costs. Ingredients rose from Rp 48 bn to Rp 52.9 bn (from 40% to 42% of revenue); delivery-app commissions from Rp 6 bn to Rp 10.1 bn; staff from Rp 24 bn to Rp 25.2 bn; rent from Rp 18 bn to Rp 18.9 bn; other costs from Rp 6 bn to Rp 6.3 bn. Two lines explain Rp 9 bn of the Rp 11.4 bn increase: ingredients and commissions.

Asking why. Segmenting revenue by channel shows that delivery orders grew while in-store sales were flat, so the revenue growth came with a commission attached at the same menu prices. Ingredient costs rose with flour and butter prices that were not passed on. The finding: the chain grew its least profitable channel and absorbed input inflation.

Recommendation: set delivery-menu prices or bundles that cover the commission, renegotiate or hedge the two largest ingredient contracts, and steer repeat customers to in-store pick-up with a loyalty offer. Then size each action before committing to it.

Fictional company; all figures are invented for practice.

What this means for you

StudentLearn the tree until you can draw it in twenty seconds; then spend all your practice on the “why” step.

Fresh graduateIn interviews, quantify before you explore: “costs grew Rp 11.4 bn against Rp 6 bn of revenue, so I will start with costs” is a sentence that scores.

Early professionalRun this tree on your own unit’s numbers once a quarter. It is the fastest way to understand what your manager is worried about.

What to do

Redraw the profit tree from memory, including the variable and fixed split.
For the worked case, cover the third and fourth paragraphs and try to reach the finding yourself.
Do the drill below, then check whether you stated the baseline before the diagnosis.
Write your recommendation in three lines: finding, two actions, the first step on Monday.

Practice drill

Was the gym promotion a success?10 min, timed

A gym chain cut its monthly fee from Rp 400,000 to Rp 300,000 to attract members. Membership rose from 8,000 to 10,000. Variable cost per member is Rp 50,000 a month; fixed costs are Rp 2.4 bn a month and did not change. Was the promotion a success? How many members would the chain need at the new price to earn its old monthly profit?

Compute monthly profit before and after.
Contribution per member is price minus variable cost.
Required members = (fixed costs + target profit) ÷ contribution.

Show a model answer

Before: revenue 8,000 × Rp 400k = Rp 3.2 bn; variable Rp 0.4 bn; profit 3.2 − 0.4 − 2.4 = Rp 0.4 bn a month. After: revenue 10,000 × Rp 300k = Rp 3.0 bn; variable Rp 0.5 bn; profit 3.0 − 0.5 − 2.4 = Rp 0.1 bn. Profit fell by three quarters, so on these numbers the promotion failed.

Contribution at the new price is Rp 250k per member. To earn Rp 0.4 bn: (2.4 + 0.4) bn ÷ 250k = 11,200 members. Simple breakeven is 2.4 bn ÷ 250k = 9,600 members, so the chain is barely above breakeven.

A strong answer adds the questions that could change the verdict: will promotional members convert to full price, does the gym have capacity for 11,200 members, and did the promotion pull existing members down to the lower fee?

Reflect

In the worked case, which number would you have asked for first, and why?
Where in your own organisation does growth hide a cost that nobody is measuring?

Do it with the pillars

The Rope
The Rope’s Lesson 6.3, Case Interviews: The Protocol, sets out how to run a profitability case aloud with an interviewer.The Pack
The Pack’s Case Interview Practice module includes live structured cases with mentors.

Sources & provenance

Original Metanoia worked case and drill; both businesses are fictional and all figures are invented. The profit-tree logic is standard business arithmetic.

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