1.3.2 Business Revenues, Costs and Profits (1)

Which one of the following best describes a fixed cost? A cost that:

• Changes directly with output

• Stays the same regardless of output

• Only needs to be paid once, when the business first starts-up

• Needs to be paid once a month

Sales price x quantity is the formula for which of the following?

• Profit

• Total costs

• Revenue

• Total variable costs

The table below gives information about Business A. Based on this information, Business A’s total fixed costs are:

• £10,000

• £30,000

• £40,000

• £70,000

A break even diagram for Business Y is shown below. The line with a value of £50,000 at an output of 3,000 units is called:

• Total revenue

• Total costs

• Fixed costs

• Total variable costs

With reference to the break even diagram, Business Y’s break even point is:

• 700 units

• 1,000 units

• 2,000 units

• 3,000 units

If the actual sales of the business is 2,500 units, its margin of safety is:

• 0 units

• 500 units

• 1,500 units

• 1,800 units

At zero output on a break even diagram, the total cost line will always start:

• At zero on both axes

• Where the variable cost line starts

• Where the fixed cost line starts

• Where the total revenue line starts

The break even diagram below shows the forecast monthly break even situation for a small business. Using the diagram, the total profit or loss the business expects to make at 1,000 units is:

• £10,000

• £14,000

• £30,000

• £40,000

A business increases its spend on promotion. The immediate effect of this action is:

• The break even level of output will remain the same

• The break even level of output will fall

• The break even level of output will increase

• The value of total costs will fall

A small business takes out a bank loan of £7,000. The loan will be repaid over 5 years, with a monthly repayment of £125. The total interest the business will pay for this loan as a percentage of the total amount borrowed is:

• 6.67%

• 7.14%

• 93.33%

• 98.25%