AS & A Level / Business / Investment, contribution and risk Question practice
Investment, contribution and risk About this practice Original, unofficial practice. Evaluative marking points are indicative: credit equivalent justified arguments, one point per distinct criterion, without double counting.
Accept equivalent valid methods and supported interpretations that address the task. Award each mark once; matching the model wording is not required.
Business Investment, contribution and risk
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1 Explain why contribution per unit is not the same as profit per unit when a firm has fixed costs. Easy 2 marks No calculator + 2 Fictional case: price is 30, variable cost 18 per unit and fixed costs 24000. Calculate break-even output and the margin of safety at sales of 2600 units. Easy 3 marks Calculator + 3 Fictional case: an investment costs 50000 now and returns net cash of 18000, 20000 and 16000 at the end of years 1, 2 and 3. Assuming uniform receipts within year 3 for payback, calculate payback and NPV using supplied discount factors 0.91, 0.83 and 0.75. Medium 4 marks Calculator + 4 Fictional case: launch A yields 80000 with probability 0.6 and loses 20000 with probability 0.4; its separate launch cost is 10000. Launch B gives 30000 for certain before a separate 5000 cost. Calculate net expected values and explain one limitation of choosing the higher value. Medium 4 marks Calculator + 5 Fictional case: a firm must choose a quick-payback machine with high maintenance or a slower-payback efficient machine with a higher forecast NPV. Evaluate using payback alone. Hard 4 marks No calculator + 6 Fictional case: an exporter's proposed expansion has positive NPV using one demand forecast and one exchange rate. Evaluate approving it without sensitivity analysis. Hard 4 marks No calculator + Self-assessed Not marked yet
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Original questions, not official past papers. Marking guidance is indicative, not an official answer key. Check your exam-board specification.
