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GCSE Unit 3 S3
Edexcel GCSE Business Unit 3 Section 3
| Question | Answer |
|---|---|
| What is the formula for breakeven? | Breakeven point is: FIXED COSTS divided by (SELLING PRICE PER UNIT – VARIABLE COST PER UNIT) It is measured in UNITS |
| Why is breakeven analysis useful to a business such as Evans Cycles? (3) | Evans can use breakeven to see how many bicycles they need to sell each month before they make a profit. This means they have a basic target to achieve each month. Achieving this target results in the business survival. |
| What is the margin of safety? What does it show? | The margin of safety is the difference between the actual level of output and the breakeven level. It shows by how many units sales can fall before a loss is made |
| What is contribution? What does it show? | Contribution = Price per unit – variable costs per unit It shows how much each sale contributes towards covering the total fixed costs |
| What is the difference between fixed costs and variable costs? | Fixed costs do not change with the level of output whereas variable costs increase directly with more output Fixed costs include: Rent, Salaries, Heating Variable costs include: Raw Materials, Piece rate wages |
| How can a business such as Nando’s improve their cash flow position? | Short Term : Increase sales of chicken, reduce the amount of frozen food purchased to store, delay paying food suppliers, etc. Long term: Sell unneeded equipment such as unused fryers, arrange a bank loan, issue new shares |
| How could Nando’s improve profit by reducing costs? | • Buy lower cost chicken • Pay restaurant staff less • Spend less on marketing their restaurants |
| How could Nando’s improving revenue? | • Improve marketing of restaurants* • Improve the food quality to be able to charge more* • Change restaurant prices (depends on price sensitivity) *The costs of improvement must be outweighed by the extra added value which increases revenue |
| What are examples of internal and external sources of finance for large businesses? | Internal -Retained Profit -Asset Sales External -Share capital/Share Issues -Mortgage -Bank Loan -Bonds -Trade Credit External -Share capital/Share Issues -Mortgage -Bank Loan -Bonds -Trade Credit |
| What does the choice of finance depend on? | The choice depends on -What the finance is needed for -The cost of finance e.g. interest, dividends -The negotiating power of the business |
Created by:
mrholland
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