2.2.3 Break-even analysis Quiz: Pearson Edexcel Business, Unit 2

The 20 questions

1. What is the formula for contribution per unit?

   • Variable cost minus price
   • Price plus variable cost
   • Price minus variable cost
   • Fixed cost minus price

2. A product sells for £30 with variable cost of £18 per unit. Fixed costs are £24,000. What is the break-even quantity?

   • 800 units
   • 1,333 units
   • 2,000 units
   • 3,000 units

3. What condition is met at the break-even point of output?

   • Costs equal profit
   • Profit equals zero
   • Sales exceed costs
   • Revenue equals costs

4. A business has a break-even point of 1,500 units and sells 2,200 units. What is its margin of safety in units?

   • 2,200 units
   • 700 units
   • 3,700 units
   • 1,500 units

5. A firm sells 3,000 units, but its break-even point is 4,000 units. What is its financial position?

   • Maximising margin
   • Making a profit
   • Making a loss
   • Breaking even

6. What does standard break-even analysis assume about selling price as output changes?

   • It decreases steadily
   • It remains constant
   • It fluctuates randomly
   • It increases with volume

7. A business has fixed costs of £36,000 and a contribution of £6 per unit. How many units must it sell to break even?

   • 4,500 units
   • 36,000 units
   • 6,000 units
   • 216,000 units

8. On a break-even chart, what is shown where the total revenue line crosses total costs?

   • Break-even output
   • Maximum profit level
   • Margin of safety
   • Total fixed costs

9. What is a key simplifying assumption of standard break-even analysis?

   • Assumes zero fixed costs
   • Assumes all output sold
   • Assumes prices fluctuate daily
   • Assumes variable costs fall

10. A firm has a 20% margin of safety. By how much can sales fall before it incurs a loss?

    • 100%
    • 80%
    • 10%
    • 20%

11. Price is £15, variable cost is £9, and fixed costs are £18,000. What is break-even output?

    • 6,000 units
    • 3,000 units
    • 1,200 units
    • 2,000 units

12. A business sells 4,000 units, with a break-even point of 3,200 units. Its contribution per unit is £5. What is its profit?

    • £800
    • £20,000
    • £4,000
    • £16,000

13. Which change will lower a firm's break-even output level?

    • Lower fixed costs
    • Higher variable costs
    • Higher fixed costs
    • Lower selling price

14. Which change will increase a firm's break-even output level?

    • Higher selling price
    • Lower variable costs
    • Higher fixed costs
    • Lower fixed costs

15. What property of fixed costs is shown by a horizontal line on a break-even chart?

    • Decreasing with output
    • Unchanged with output
    • Rising with volume
    • Fluctuating randomly

16. A firm's contribution is £10 per unit and its fixed costs are £50,000. If it sells 6,000 units, what is its profit?

    • £110,000
    • £50,000
    • £10,000
    • £60,000

17. What financial element does unit contribution primarily help to cover?

    • Retained profit
    • Fixed costs
    • Shareholder dividends
    • Corporation tax

18. Which action lowers the break-even point of a product?

    • Higher selling price
    • Higher fixed cost
    • Higher variable cost
    • Lower selling price

19. On a break-even chart, what occurs when total revenue exceeds total costs?

    • Operating profit
    • Margin of safety
    • Operating loss
    • Break-even point

20. A firm expects to sell 2,000 units with a margin of safety of 25%. What is its break-even point in units?

    • 1,600 units
    • 500 units
    • 2,500 units
    • 1,500 units

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