EDEXCEL GCSE BUSINESS · PAPER 1
Exam Practice: Revenue, Costs and Profit
Revenue, costs and profit · Putting a business idea into practice · Lesson 2 of 5 · 10 marks · 25 minutes
Name Date
Answer all questions. Show your working in calculations.
Question 1 DEFINE [1 mark]
Define the term 'variable costs'.
Question 2 CALCULATE [2 marks]
A business makes 800 units a month. Its fixed costs are £2,000 a month and its variable costs are £3 per unit. Calculate its total costs. You are advised to show your working.
Question 3 CALCULATE [2 marks]
The same business sells all 800 units at £8 each. Using your answer above, calculate its profit. You are advised to show your working.
Question 4 CALCULATE [2 marks]
Jess borrows £10,000 to open a nail salon. She repays £11,500 in total. Calculate the rate of interest on the loan. You are advised to show your working.
Question 5 EXPLAIN [3 marks]
Explain one impact on a business of an increase in its fixed costs.
Answers
Check your answer only once you have written one.
Question 1 [1 mark]
Costs that change directly with the number of products a business makes or sells.
▸ Costs that vary with output / sales 1 mark
Question 2 [2 marks]
Total costs = £2,000 + (£3 × 800) = £2,000 + £2,400 = £4,400
▸ Correct method: fixed costs + (variable cost per unit × quantity) 1 mark
▸ Correct answer: £4,400 1 mark (award 2 marks for the correct answer with no working)
Question 3 [2 marks]
Revenue = £8 × 800 = £6,400. Profit = £6,400 - £4,400 = £2,000
▸ Correct method: (price × quantity) - total costs 1 mark
▸ Correct answer: £2,000 1 mark (award 2 marks for the correct answer with no working; own figure rule applies)
Question 4 [2 marks]
(£11,500 - £10,000) ÷ £10,000 × 100 = 15%
▸ Correct method: (total repayment - borrowed amount) ÷ borrowed amount × 100 1 mark
▸ Correct answer: 15% 1 mark (award 2 marks for the correct answer with no working)
Question 5 [3 marks]
Its profit may fall (1). Fixed costs, such as rent, must be paid however many products the business sells, so its total costs rise (1). Unless the business can raise its prices or sell more, the gap between revenue and total costs shrinks, reducing profit (1).
▸ An impact identified, e.g. lower profit / higher total costs / may need to raise prices 1 mark
▸ First linked point of explanation 1 mark
▸ Second linked point of explanation 1 mark