Lesson 3.5.2.1

3.5.2.1 Budgets, cash flow forecasts and break-even analysis Quiz: AQA Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.5.2.1, Budgets, cash flow forecasts and break-even analysis: 20 multiple choice questions for the AQA Business (7132), Unit 5: Financial management, written with Revision Ninja.

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The 20 questions

  1. Break-even output is:

    • The output at which fixed costs equal variable costs
    • The output at which total costs are at their lowest level
    • The level of output at which total revenue equals total costs, so profit is zero
    • The output at which revenue is at its maximum

  2. Contribution per unit is:

    • Selling price per unit minus variable cost per unit
    • Variable cost per unit minus price per unit
    • Total revenue minus total fixed costs
    • Selling price per unit minus fixed cost per unit

  3. Margin of safety is:

    • The amount by which actual or budgeted output exceeds break-even output
    • The amount by which break-even output exceeds actual output
    • The fixed costs that must be covered before any sales are made
    • The total profit made before fixed costs are deducted

  4. An adverse variance occurs when:

    • Actual performance is worse than budgeted, for example costs above budget or revenue below budget
    • Actual output equals the budgeted level exactly
    • Actual costs are below budget, saving money for the business
    • Actual revenue is higher than budgeted revenue

  5. The main value of budgeting is:

    • It guarantees that all costs will be met without any changes
    • It removes the need for a business to forecast sales
    • It eliminates the need to track actual spending
    • It sets financial targets and allows managers to monitor performance against plans

  6. Total contribution is calculated as:

    • Fixed costs divided by contribution per unit
    • Price per unit multiplied by fixed costs
    • Revenue minus fixed costs only
    • Contribution per unit multiplied by the number of units sold

  7. A cash flow forecast shows:

    • Predicted cash inflows and outflows over future periods, with the resulting opening and closing cash balances
    • Market shares of competitors in the next year
    • Past profits recorded in the income statement at year end
    • The value of assets and liabilities at a single point in time

  8. A product has a price of 20 and variable cost of 8, with fixed costs of 60,000. What is the break-even output?

    • 5,000 units
    • 3,000 units
    • 7,500 units
    • 12,000 units

  9. Using the same product, what is the break-even revenue?

    • 60,000
    • 100,000
    • 40,000
    • 160,000

  10. A business sells 7,500 units and its break-even output is 5,000 units. What is its margin of safety in units?

    • 12,500 units
    • 5,000 units
    • 7,500 units
    • 2,500 units

  11. Using the same product and 7,500 units sold, what is the profit?

    • 150,000
    • 60,000
    • 30,000
    • 90,000

  12. The selling price rises from 20 to 22, with all else unchanged. What happens to break-even output?

    • It is unchanged because fixed costs are unchanged
    • It falls to 3,000 units as variable costs double
    • It falls to about 4,286 units, because contribution per unit rises to 14
    • It rises to 6,000 units because revenue rises

  13. Budgeted revenue is 50,000 and actual revenue is 46,000. What is the revenue variance?

    • 46,000 adverse
    • 96,000 favourable
    • 4,000 favourable
    • 4,000 adverse

  14. Budgeted costs are 80,000 and actual costs are 84,500. What is the cost variance?

    • 80,000 favourable
    • 4,500 adverse
    • 164,500 adverse
    • 4,500 favourable

  15. A cash flow forecast predicts a negative net cash flow in month three. What is the most appropriate response?

    • Stop all sales to reduce cash outflows
    • Arrange an overdraft or delay some payments before the shortfall occurs
    • Increase fixed costs to balance cash flow
    • Ignore it because profit is positive

  16. Evaluate: what is the strongest criticism of break-even analysis?

    • It calculates profit exactly and is never based on estimates
    • It is required by law for all sole traders
    • It is only relevant to businesses that make a loss
    • It assumes constant selling prices and cost behaviour, which may not hold in practice, so results are approximate

  17. Fixed costs rise from 60,000 to 75,000, with price 20 and variable cost 8. What is the new break-even output?

    • 5,000 units
    • 6,250 units
    • 9,375 units
    • 3,750 units

  18. A business budgets 10,000 units with break-even of 6,000 units. Sales then fall 20% from the budget. What is the margin of safety now?

    • 6,000 units
    • 4,000 units
    • 8,000 units
    • 2,000 units

  19. A business's costs are favourable against budget, but its revenue is adverse. What is the best interpretation?

    • Favourable cost variances always mean the budget was too high
    • Adverse revenue variances are impossible when costs fall
    • Cost savings may not compensate if lower sales reduce profit, so the overall position must be analysed
    • The business has performed excellently overall

  20. A business cuts its price from 20 to 18, and sales rise from 7,500 to 9,000 units. Variable cost is 8 and fixed costs are 60,000. What is the new profit?

    • 42,000
    • 24,000
    • 36,000
    • 30,000, the same as before

All AQA Business quizzes