Business

1. 1.

   A firm sells units for GBP 30 each, variable cost is GBP 18 per unit and fixed costs are GBP 6000. Calculate contribution per unit and break-even output.

   [3 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Each sale contributes GBP 12 towards fixed costs before profit begins.
   2. At 500 units revenue is GBP 15000 and total cost is 6000 + 500(18) = GBP 15000.
   3. This simple model assumes a constant selling price, unit variable cost and fixed-cost level over the relevant range.

   Marking points

   • Contribution per unit = 30 - 18 = GBP 12.
   • Break-even output = fixed costs/contribution per unit.
   • Break-even output = 6000/12 = 500 units.

   Examiner tip: Contribution is not profit per unit: fixed costs still need to be covered.

2. 2.

   A project costs GBP 10000 now and produces GBP 6000 at each year-end for two years. Use discount factors 0.909 and 0.826. Calculate net present value and give one limitation of using it alone.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Discount each inflow using its own year factor; money received later is worth less at the chosen discount rate.
   2. Subtract the initial outflow only after adding the discounted inflows. A positive NPV supports acceptance under these assumptions.
   3. A GBP 410 margin is small relative to the investment, so modest errors in forecasts could reverse the conclusion.

   Marking points

   • Present values are GBP 5454 and GBP 4956.
   • Total present value = GBP 10410.
   • NPV = 10410 - 10000 = GBP 410.
   • Forecast uncertainty, strategic factors or the discount-rate assumption can limit the decision.

   Examiner tip: A positive NPV is not a guarantee of success; it depends on the forecast and discount rate.

3. 3.

   A tutoring start-up has limited cash and spare teacher capacity. It can spend GBP 3000 on broad paid ads or GBP 3000 on a small measured referral pilot. Evaluate the choice using conversion, capacity and cash-flow risk.

   [5 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Start with the constraint: limited cash makes learning efficiency and timing important, not just maximum reach.
   2. Track paid conversion, cost per booking, repeat purchase and teacher availability for each option. Do not assume clicks become revenue.
   3. A reasonable recommendation is a pilot with a defined cost ceiling, then expansion only when contribution and delivery evidence justify it. Other well-supported conclusions are acceptable.

   Marking points

   • Compare acquisition cost per paying learner rather than impressions alone.
   • Connect conversion and retention to expected contribution and cash recovery.
   • Check subject/time-slot capacity so demand can actually be served.
   • A measured pilot can limit uncertainty; referrals may scale slowly or be unrepresentative.
   • Give a conditional recommendation with metrics and a stop/scale threshold, acknowledging missing data.

   Examiner tip: Apply your reasoning to the limited cash and available teacher capacity; generic marketing claims earn little analytical credit.

Original, unofficial practice questions from SubjectScout — not official past-paper questions.