Edexcel GCSE Business 1.3

Which one of the following is the correct formula for calculating the total revenue generated by each product sold by a business?

• Variable costs X Selling price per unit

• Fixed costs X Selling price per unit

• Quantity sold X Selling price per unit

• Total output X Total inputs

Which one of the following is the correct definition of overheads?

• Costs that are not directly related to the production of goods or supply of services

• Costs that are directly related to the production of goods or supply of services

• Costs that vary according to level of output

• Wages paid to staff for working extra hours

Which two of the following are examples of short-term methods of finance?

• Share capital

• Loan

• Trade credit

• Retained profit

• Overdraft

Which one of the following is an example of a fixed cost for a business that makes shoes?

• Leather for making the shoes

• Rent on the factory premises

• Boxes used in packaging the shoes

• Electricity to run the cutting machines

Which one of the following is the correct formula for calculating the break even level of output?

• Total fixed costs / selling price per unit

• Total costs / contribution per unit

• Total fixed costs / contribution per unit

Which one of the following correctly defines a situation of insolvency?

• Where the value of items owned is greater than the value of money owed

• Where total costs exceed total revenue

• Where the value of inputs is greater than the value of outputs

• Where debts are unable to be met as they fall due

Which two of the following statements are true about using trade credit as a source of finance for a business?

• It dilutes ownership and control of the business

• It may deny a business any discounts available for paying promptly

• It is interest free - as long as the business pays within the time-frame specified

• It is difficult and expensive to arrange

• It negatively affects cash flow

Which one of the following is the correct definition of margin of safety?

• The amount by which total revenue can fall before a business is unable to cover its total fixed costs

• The amount by which output can fall before a business reaches its break even level of output

• The amount by which the total revenue of a business exceeds its total costs

• The amount by which a business’s actual output exceeds its planned level of output

A business’s fixed costs are £10 000, selling price per unit is £4, and total variable costs per unit are £1.50. Which one of the following is the break even level of output (to the nearest whole number)?

• 2 500 units

• 2 857 units

• 4 000 units

• 6 667 units

Which two of the following statements are true about using venture capital as a source of finance to start up a business?

• Venture capital is often used to raise small sums of money (eg up to £10,000)

• Venture capital firms often provide expert management support

• Venture capital is simple and quick to arrange

• Venture capital does not dilute ownership and control

• Many venture capital firms want a relatively quick return