Edexcel IGCSE Business: Costs and break-even analysis (4BS1) – 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 section 3.3 Costs and break-even analysis of the Pearson Edexcel International GCSE in Business (4BS1) specification, Issue 2, February 2026. They suit both Paper 1 (small businesses) and Paper 2 (large businesses), as both can draw on the whole content. Money is in pounds; businesses are invented. The standard form is: break-even output = fixed costs ÷ contribution per unit, where contribution per unit = selling price − variable cost per unit. Rounding break-even output up to a whole unit is the writer’s own advice, and the formula is the standard form; neither is specification text.

Course links: Edexcel IGCSE 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 variable costs. [2]

2. Mehwish runs a small bakery. Identify whether each of these costs is fixed or variable. [4]

• Monthly rent of the shop unit
• Flour used in the loaves
• Insurance for the oven
• Paper bags used for each customer

3. Mira makes mugs. She sells each mug for £8. Variable cost is £3 a mug. Fixed costs are £2,000 a month.

(a) Complete the table for each output: revenue, total costs and profit or loss. [4]

Mugs	Revenue (£)	Total costs (£)	Profit or loss (£)
200
400
600
800

(b) Identify Mira’s break-even level of output. [1]

4. A firm sells a product for £25. Variable cost is £13 a unit. Fixed costs are £18,000 a year.

(a) Calculate the break-even level of output. [3]

(b) Calculate the profit if the firm sells 2,100 units. [2]

5. A break-even chart for a printing business has these plotted points. Revenue is £0 at 0 sets and £24,000 at 2,000 sets. Total costs are £6,000 at 0 sets and £18,000 at 2,000 sets. Both lines are straight.

(a) Identify the break-even level of output. [1]

(b) Calculate the profit at 1,800 sets. [2]

(c) Calculate the loss at 600 sets. [2]

6. Explain one way a rise in selling price can lower a firm’s break-even output. [3]

7. Jaspreet runs a food truck. A meal sells for £9. Variable cost is £4 a meal and fixed costs are £3,500 a month. His supplier now raises the variable cost to £4.50 a meal.

(a) Calculate the break-even output before the rise. [2]

(b) Calculate the break-even output after the rise. [2]

(c) Analyse how the rise affects Jaspreet’s monthly profit if he sells 1,000 meals. [4]

8. Outline two limitations of break-even charts. [4]

9. A business’s fixed costs rise but its price and variable cost per unit do not change. Describe what happens to the total costs line and the break-even point on its chart. [3]

10. Orchard Candles sells 1,200 candles a month at £12 each. Variable cost is £7 a candle and fixed costs are £5,400 a month. The owner is choosing between two options.

• Option A: raise the price to £15. She expects sales to fall to 900 candles.
• Option B: keep the price at £12 and buy cheaper wax, so variable cost falls to £6.50. She expects sales to stay at 1,200.

(a) Calculate the break-even output for each option. [4]

(b) Justify which option the owner should choose. [6]

11. Layla plans to open a cafe. Fixed costs are £9,000 a month. The average customer spends £6 and the variable cost per customer is £2.40. She forecasts 100 customers a day for 26 days each month.

(a) Calculate the break-even number of customers a month. [3]

(b) Calculate her forecast monthly profit. [2]

(c) Evaluate whether break-even analysis gives Layla enough information to decide whether to open the cafe. [7]

Answers

1. Costs that change in proportion to output [1], such as materials or packaging, so that total variable cost rises as more is produced [1]. [2] Examiner insight: A definition is likely to gain most when it says what the cost depends on (output). An example alone does not define the term.

2. Rent: fixed [1]. Flour: variable [1]. Insurance: fixed [1]. Paper bags: variable [1]. [4] Examiner insight: Judge each cost separately by asking whether it changes when output changes.

3. (a) 200 mugs: revenue 1,600, total costs 2,000 + 600 = 2,600, loss of 1,000 [1]. 400 mugs: revenue 3,200, total costs 3,200, profit 0 [1]. 600 mugs: revenue 4,800, total costs 3,800, profit 1,000 [1]. 800 mugs: revenue 6,400, total costs 4,400, profit 2,000 [1]. (b) Break-even is 400 mugs, where revenue equals total costs [1]. [5] Examiner insight: Show how each row was found. Writing a loss as a negative figure or with the word loss makes the sign clear, and a bare number is easy to misread.

4. (a) Contribution per unit = 25 − 13 = £12 [1]. Break-even = 18,000 ÷ 12 [1] = 1,500 units [1]. (b) Units above break-even = 2,100 − 1,500 = 600, and 600 × 12 [1] = £7,200 [1]. [5] Examiner insight: Dividing fixed costs by the selling price is the common slip. Setting out the contribution first makes the method clear even if the arithmetic goes wrong.

5. (a) The lines meet where revenue equals total costs. Revenue slopes at £12 a set (24,000 ÷ 2,000) and total costs at £6 a set (12,000 ÷ 2,000), so 12x = 6,000 + 6x. Break-even is 1,000 sets [1]. (b) Revenue = 1,800 × 12 = 21,600. Total costs = 6,000 + 6 × 1,800 = 16,800 [1]. Profit = £4,800 [1]. (c) Revenue = 600 × 12 = 7,200. Total costs = 6,000 + 3,600 = 9,600 [1]. Loss = £2,400 [1]. [5] Examiner insight: When a chart gives two points per line, work out the price and variable cost per set from them and state both; this shows the reasoning.

6. A higher price increases the contribution on each unit [1], because variable cost per unit is unchanged [1]. Each unit therefore covers more of the fixed costs, so fewer units are needed to break even [1]. [3] Examiner insight: A strong Explain answer states the fact and then develops it twice. Saying “it makes more money” without linking to fixed costs gives less to credit.

7. (a) Contribution = 9 − 4 = £5 [1]. 3,500 ÷ 5 = 700 meals [1]. (b) Contribution = 9 − 4.50 = £4.50 [1]. 3,500 ÷ 4.50 = 777.8, so 778 meals [1]. (c) Contribution per meal falls from £5 to £4.50 [1]. Profit at 1,000 meals falls from 1,000 × 5 − 3,500 = £1,500 to 1,000 × 4.50 − 3,500 = £1,000 [1], a fall of £500 or one third [1]. He must now sell 78 more meals to break even, so the van is less safe if sales drop, so he could consider raising the price or changing supplier [1]. [8] Examiner insight: Analyse answers are likely to gain more when the figures are linked to the business’s position, for example the extra 78 meals, rather than only restating the calculation.

8. First limitation, for example revenue is drawn as a straight line, which assumes the same price at every output [1]. Link: in practice discounts for bulk orders lower average price, so revenue is overstated [1]. Second limitation, for example the chart assumes all output is sold [1]. Link: unsold stock is still paid for, so real profit is lower than shown [1]. [4] Examiner insight: Outline wants two linked points for each limitation. Naming a limitation without saying what it does to the chart or the decision gives only the first point.

9. The total costs line starts higher on the vertical axis by the amount of the increase [1] and stays parallel to the old line, since variable cost per unit is unchanged [1]. It meets the revenue line further to the right, so the break-even output increases [1]. [3] Examiner insight: Mention both the line and the break-even point, and give a direction.

10. (a) Option A: contribution = 15 − 7 = £8, and 5,400 ÷ 8 = 675 candles [2]. Option B: contribution = 12 − 6.50 = £5.50 [1], and 5,400 ÷ 5.50 = 981.8, so 982 candles [1]. (b) Profit for A at 900 candles = 900 × 8 − 5,400 = £1,800 [1]. Profit for B at 1,200 candles = 1,200 × 5.50 − 5,400 = £1,200 [1]. Option A has the lower break-even output and the higher profit, and it would also beat today’s profit of £600 [1]. However, A relies on the forecast fall being only to 900; if more customers leave, the profit is lower, and B keeps sales steady [1]. B’s break-even output of 982 is close to its sales of 1,200, so an 18% sales drop removes profit [1]. Recommend Option A because the lower break-even output and higher profit outweigh the risk, provided she is confident that sales will stay above about 825 candles, the level at which A and B give the same profit [1]. [10] Examiner insight: Justify asks you to recommend one option. Use figures from both, give one risk and reach a clear choice.

11. (a) Contribution per customer = 6 − 2.40 = £3.60 [1]. 9,000 ÷ 3.60 [1] = 2,500 customers [1]. (b) Forecast customers = 100 × 26 = 2,600, which is 100 above break-even [1]. Profit = 100 × 3.60 = £360 [1], since each of the 100 customers above break-even adds £3.60. (c) Points for: the analysis shows she needs 2,500 customers, or about 96 a day, to cover costs [1]. The forecast is only 100 above that, so the cafe is close to break-even and a small fall in customers would give a loss [1]. It is quick and uses her own figures, so it highlights risk before she spends money [1]. Points against: the forecast is an estimate and may be wrong [1]. The chart does not show whether customers will actually come, nor competition or location [1]. Costs such as rent may change, and a loss in early months would affect her cash [1]. Judgement: break-even analysis is helpful for showing how thin the margin is, but she needs market research and a cash-flow forecast too [1]. [12] Examiner insight: Evaluate answers are likely to gain more when they use the calculated figures from parts (a) and (b) and finish with a supported conclusion rather than a summary.

Where marks are usually lost

• Dividing fixed costs by the selling price instead of by the contribution per unit.
• Giving break-even output with no unit, or leaving a decimal such as 981.8 instead of a whole unit.
• Treating variable cost per unit as the total variable cost.
• Writing a loss as a profit, or leaving out the minus sign or the word loss.
• Starting the total costs line at zero rather than at fixed costs.
• Giving one point in an Explain answer, which needs a statement and two expansion points.
• Listing limitations without saying what they do to the business’s decision.
• In Justify and Evaluate answers, calculating well but giving no recommendation or conclusion.

Next steps

• Recap the formulas in the revision notes.
• Re-read the study guide.
• Course hub: Edexcel IGCSE Business and the printable checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Frequently asked questions

What do these costs and break-even practice questions cover? They follow section 3.3 of Pearson Edexcel International GCSE Business (4BS1): revenue, fixed and variable costs, profit and loss, the break-even level of output, break-even charts and their limitations.

What is the most common break-even mistake? Dividing fixed costs by the selling price instead of by the contribution per unit. Contribution per unit is the selling price minus the variable cost per unit.

Should break-even output be rounded? Yes. Give break-even as a whole number of units with its unit, rounding up to the next whole unit so the business at least covers its costs, rather than leaving a decimal.

Where does the total costs line start on a break-even chart? The total costs line starts at the fixed cost figure on the vertical axis at zero output, not at zero. Starting it at zero is a common error.

Official syllabus

Pearson Edexcel International GCSE in Business (4BS1), Specification, Issue 2, February 2026, published by Pearson Education Limited. Topic 3: Business finance, section 3.3 Costs and break-even analysis, points 3.3.1 to 3.3.3.