Edexcel GCSE Business: Aims, objectives, revenue, costs and profit (1BS0) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover content items 1.3.1 and 1.3.2 of Topic 1.3, Putting a business idea into practice, in the Pearson Edexcel Level 1/Level 2 GCSE (9-1) in Business (1BS0) specification, Issue 2, July 2022. Calculators may be used; the Appendix 3 formulae are not supplied in the examinations. Money is in pounds and every business is invented. Profit is taken as revenue minus total costs, and the mark splits in the answers are the writer’s own.

Course links: Edexcel GCSE Business hub and the printable checklist. Read the study guide and revision notes first. The free 10-minute diagnostics test wider knowledge.

Questions

1. Define the term business objective. [2]

2. Which two of these are non-financial objectives? Survival, independence and control, market share, challenge, profit. [2]

3. Orchard Lane Juice sells each bottle for £3.20. Variable cost is £1.10 a bottle. Fixed costs are £1,260 a month. In June it sells 1,000 bottles.

(a) Calculate the revenue for June. [1] (b) Calculate total costs for June. [2] (c) Calculate the profit for June. [1]

4. Pavel borrows £15,000 to buy a van for his delivery firm. He repays £16,800 in total. Calculate the percentage interest he pays. [3]

5. Quill and Stone sells notebooks at £9 each. Variable cost is £4 a notebook. Fixed costs are £1,800 a month.

(a) Complete the table. [4]

Output (notebooks)	Sales revenue (£)	TC (£)	Profit/loss (£)
200
400
600
800

(b) Calculate the break even level of output. [2]

6. Brindle Leather sells wallets at £18 each. Variable cost is £7.50 a wallet. Fixed costs are £6,300 a month. It budgets to sell 850 wallets.

(a) Calculate the break even level of output. [2] (b) Calculate the margin of safety. [1] (c) Calculate the revenue at break even. [1]

7. Marrow Lane Pottery has the following figures for one month. The total costs figure includes fixed costs of £4,400.

Mugs	Total revenue (£)	Total costs (£)
0	0	4,400
200	4,000	6,200
400	8,000	8,000
600	12,000	9,800
800	16,000	11,600

(a) Use the table to identify the break even level of output. [1] (b) The pottery sells 700 mugs. State the margin of safety. [1] (c) Calculate the profit at 700 mugs. [2] (d) Fixed costs rise by £1,100. Calculate the new break even level of output. [2] (e) Outline one effect of this rise on the pottery. [2]

8. Explain one reason why the objectives of a start-up business may differ from those of a business that has traded for many years. [3]

9. Harbour Row Community Kitchen sells hot meals at low prices and gives jobs to people who struggled to find paid work for years. Its owner, Zarnigor, says that profit is not her main objective. Outline two reasons why this may be a sensible choice for the business. [4]

10. Halden Hot Sauce sells jars at £30 each. Variable cost is £12 a jar. Fixed costs are £7,200 a month. The budget is 650 jars. A supplier raises the variable cost to £15 a jar.

(a) Calculate the break even level of output and the margin of safety before the rise. [3] (b) Analyse how the rise affects Halden Hot Sauce. [4]

11. Fennick Tea Co sells packs at £25 each. Variable cost is £10 a pack. Fixed costs are £9,000 a month. It sells 900 packs a month. The owner is weighing up two plans.

Plan A: charge £28 a pack, with sales forecast to drop to 800 packs. Plan B: keep £25 a pack but add £1,800 a month of advertising, with sales forecast to climb to 1,000 packs.

Justify which plan Fennick Tea Co should choose. [9]

Answers

1. A specific target [1] that a business sets, usually measurable and with a time limit, to help it move towards its aim [1]. [2] Examiner insight: A one-word answer such as “target” is thin. Answers that say it is specific or measurable, and that it supports the longer-term aim, give the definition a second point.

2. Independence and control [1]. Challenge [1]. [2] Examiner insight: Survival, market share and profit are financial objectives in the specification list. Give exactly two answers, as the question asks.

3. (a) £3.20 × 1,000 = £3,200 [1] (b) Total variable costs = £1.10 × 1,000 = £1,100 [1]. Total costs = £1,260 + £1,100 = £2,360 [1] (c) £3,200 − £2,360 = £840 [1] Examiner insight: The command word is Calculate, so show each stage. Writing the working lets a small slip be told apart from a wrong method.

4. Interest = £16,800 − £15,000 = £1,800 [1]. £1,800 ÷ £15,000 [1] × 100 = 12% [1]. [3] Examiner insight: Dividing by the total repayment, not the amount borrowed, is a common wrong route. Check which figure sits on the bottom of the formula.

5. (a) 200: revenue £1,800, total costs £2,600, loss £800 [1]. 400: revenue £3,600, total costs £3,400, profit £200 [1]. 600: revenue £5,400, total costs £4,200, profit £1,200 [1]. 800: revenue £7,200, total costs £5,000, profit £2,200 [1]. (b) £1,800 ÷ (£9 − £4) = £1,800 ÷ £5 [1] = 360 notebooks [1] Examiner insight: In a table, label a negative result as a loss. The break even answer should agree with the table: profit turns from a loss to a profit between 200 and 400.

6. (a) £6,300 ÷ (£18 − £7.50) = £6,300 ÷ £10.50 [1] = 600 wallets [1] (b) 850 − 600 = 250 wallets [1] (c) 600 × £18 = £10,800 [1] Examiner insight: Give the margin of safety in units, matching the formula. If a question asks for revenue, as in part (c), a units answer will not match what was asked.

7. (a) 400 mugs, where revenue and total costs are both £8,000 [1]. (b) 700 − 400 = 300 mugs [1] (c) Price = £4,000 ÷ 200 = £20 and variable cost = (£6,200 − £4,400) ÷ 200 = £9 a mug, so revenue at 700 = £14,000 and total costs = £4,400 + £6,300 = £10,700 [1]. Profit = £3,300 [1] (d) New fixed costs = £5,500. £5,500 ÷ (£20 − £9) = £5,500 ÷ £11 [1] = 500 mugs [1] (e) Break even output rises from 400 to 500 mugs [1], so the margin of safety at 700 mugs falls from 300 to 200 mugs and the pottery has a smaller cushion before it makes a loss [1]. [2] Examiner insight: Part (e) asks for an effect on this business. An answer that quotes the new figures and says what they mean for the pottery is stronger than a general statement about costs.

8. A start-up often has few customers and little spare cash [1]. It is therefore likely to set survival as its first objective, to stay open and cover its costs [1]. A long-established business is already covered on this, so it can pursue profit or a larger market share [1]. [3] Examiner insight: Explain asks for a statement and two expansion points. The expansions should build on the first point, not repeat it in new words.

9. Point one: the kitchen has a social objective, which is to give jobs to people who struggled to find paid work for years [1], so it may accept the lower profit that comes from paying wages to staff who might otherwise be hard to employ, because this fits its purpose [1]. Point two: it sells meals cheaply to the local community, which could attract loyal customers and support from local people [1], and this may help the business survive even if profit is small [1]. [4] Examiner insight: Outline asks for linked points in the context given. Tie each point to the kitchen’s meals, prices or workers, not to community aims in general.

10. (a) £7,200 ÷ (£30 − £12) = £7,200 ÷ £18 [1] = 400 jars [1]. Margin of safety = 650 − 400 = 250 jars [1] (b) New contribution = £30 − £15 = £15 [1]. New break even = £7,200 ÷ £15 = 480 jars, and the margin of safety falls to 170 jars (650 − 480) [1]. Budgeted profit falls from £4,500 to £2,550 if the price is unchanged [1]. The owner could raise the price or find a cheaper supplier, but a higher price risks losing customers [1]. [7] Examiner insight: Analyse needs the figures and a link back to the business. Quoting both break even output and margin of safety, then saying what the owner might do, gives the answer a clear chain of reasoning.

11. Current profit = 900 × £15 − £9,000 = £4,500, as a reference point. Plan A: contribution £18, profit = 800 × £18 − £9,000 = £5,400 [1]. Break even = £9,000 ÷ £18 = 500 packs; margin of safety = 300 packs [1]. Plan B: fixed costs £10,800; profit = 1,000 × £15 − £10,800 = £4,200 [1]. Break even = £10,800 ÷ £15 = 720 packs; margin of safety = 280 packs [1]. For A: higher profit by £1,200 [1], lower break even output, and the larger margin of safety [1]. For B: higher sales, which could raise market share [1], but profit falls below the current £4,500 and fixed costs are committed even if the advertising does not work [1]. Judgement: choose Plan A on the figures, because it earns more profit and carries less risk [1]. A weakness is that the fall to 800 packs is only expected. If demand is more sensitive to price, profit could be lower. If the owner’s objective was market share rather than profit, Plan B might be preferred. [9] Examiner insight: Justify asks you to recommend one of two options using the information given. A recommendation backed by calculated figures that also admits one risk is stronger than a recommendation with figures alone.

Where marks are usually lost

• A loose definition of objective that never mentions a target.
• Naming survival, profit or market share as non-financial objectives.
• Treating revenue as profit, or forgetting to add fixed costs into total costs.
• Dividing interest by the total repayment, not the amount borrowed.
• Using the price, not price minus variable cost, as the divisor in the break even formula.
• Giving a margin of safety in pounds when the question wanted units.
• Writing about costs in general and not the business in the question.
• Describing a change to the lines without saying what it means for the owner.
• Recommending an option without comparing both and noting a risk.

Next steps

• Re-read the revision notes and the study guide.
• Tick off the topic on the printable checklist and visit the Edexcel GCSE Business hub.
• Try all the free 10-minute diagnostics.
• Book a free trial class.

Frequently asked questions

Which part of Edexcel GCSE Business (1BS0) do these questions cover? Content items 1.3.1 and 1.3.2 of Topic 1.3 Putting a business idea into practice, covering business aims and objectives, and revenue, costs, profit and break-even.

What is the most common mistake in break-even calculations? Using the selling price as the divisor instead of contribution per unit, which is price minus variable cost. Show the working so the method is visible.

Should the margin of safety be in pounds or units? In units when the question asks for output, matching the formula of actual output minus break-even output. Read the question carefully to see which it wants.

What does a justify question need in Edexcel GCSE Business? Recommend one of the two options using the information given, compare both with figures, and note a risk or condition before reaching your decision.

Are formulae given in the Edexcel GCSE Business exam? No. Calculators may be used, but the Appendix 3 formulae are not supplied in the examinations, so learn them, including the break-even formula.

Official syllabus

Pearson Edexcel Level 1/Level 2 GCSE (9-1) in Business (1BS0), Specification, Issue 2, July 2022, published by Pearson Education Limited. The subject content covered is in Theme 1 (Investigating small business), under Topic 1.3 (Putting a business idea into practice): items 1.3.1 and 1.3.2.