Sal is starting a cupcake factory and walks learners through the cost and profit calculations necessary for any new business. He uses simple numbers for the start-up costs, overhead, product price, and cost per cupcake. Sal writes out the revenue formula and calculates revenue in both an optimistic scenario (100% utility) and a break-even scenario. He touches on the terms "in the black" and "in the red," as well as the cost of goods (COGs), gross profit, operating profit, and percent return. As Sal leads us into the next video, he explains that some companies operate at less than the break-even scenario for competitive purposes.