Business Studies Multiple Choice Question – 12 January 2022

At the Stafford Vintage Trade Fair, held on 1 April 2021, Lucy managed to break-even by selling 40 items of costume jewellery she had made
that week.

Assuming fixed costs of £60, and an average selling price of £9, which one of the following represents Lucy’s variable cost per unit?

Select ONE answer:

1. £0.66
2. £1.50
3. £6.66
4. £7.50

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 -Break-even = Fixed cost (FC) / Selling Price-Average Variable costs, OR Contribution = FC/BE, OR average variable costs are total variable costs divided by output OR variable costs = sales revenue minus FC divided by breakeven OR variable costs are costs which vary with output OR Break-even is the output level where total costs equals total revenue. ==> 40 = £60/£9 – £7.50

This work is licensed under a Creative Commons Attribution 4.0 International License.