Accounting Multiple Choice Question – 23 January 2021

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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A company manufactures one product. It has variable costs of £600,000 and fixed costs of £300,000.
If it bought all its production from another supplier, it could use its existing machinery to make a total contribution of £400,000. Fixed costs would not change.
What is the maximum price it should pay to obtain all its production from another supplier?

Select ONE answer:

  1. £600,000
  2. £700,000
  3. £900,000
  4. £1,000,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

  1. Not correct
  2. Not correct
  3. Not correct
  4. Correct – £600K + £400K

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