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Business · Topic

Costs, break-even and accounts

Show the break-even formula and the substitution; the unit is a separate mark.

2 original questions in the bank, worth 6 marks · above the two-per-topic floor

Drill this topic All costs, break-even and accounts questions

The questions, with the examiner reasoning

Calculate4 marksBGCSE

A juice producer has fixed costs of P18,000 a month. Each bottle sells for P25 and has variable costs of P10. Calculate the break-even output and the margin of safety if the business sells 1,500 bottles.

Show the mark scheme and the examiner note

Answer: Break-even = 1,200 bottles; margin of safety = 300 bottles

  1. Contribution per bottle = 25 − 10 = P15
  2. Break-even = fixed costs ÷ contribution = 18,000 ÷ 15 = 1,200 bottles
  3. Margin of safety = 1,500 − 1,200 = 300 bottles
  4. Unit required on both answers

Examiner technique: Four marks means four visible steps. Learners who write only 1,200 usually score two of them — the contribution and the margin of safety are marks in their own right.

Define and calculate2 marksBoth boards

Define "contribution per unit" and calculate the total contribution for a business that sells 1,000 units with a selling price of P40 and variable costs of P25 per unit.

Show the mark scheme and the examiner note

Answer: Contribution per unit = selling price − variable cost per unit = P15; total contribution = 1,000 × P15 = P15,000

  1. Definition: the amount each unit contributes towards fixed costs and profit
  2. Per unit: 40 − 25 = P15
  3. Total: 1,000 × 15 = P15,000

Examiner technique: Definitions must not use the word being defined. "Contribution is what it contributes" is the most common reason a definition mark is not awarded.