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Using Extract B, calculate the contribution per unit of one lip balm - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2

Question 1

Using Extract B, calculate the contribution per unit of one lip balm. You are advised to show your working.

Worked Solution & Example Answer:Using Extract B, calculate the contribution per unit of one lip balm - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2

Step 1

Selling price per unit

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Answer

The selling price per unit can be calculated from the total revenue in the break-even chart. According to the chart, the total revenue when the output is 6,000 units (6 in 1000s) is £30,000. Therefore, the selling price per unit is:

$Selling\ Price\ per\ unit = \frac{Total\ Revenue}{Monthly\ Output} = \frac{£30,000}{6,000} = £5$

Step 2

Variable cost per unit

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Answer

From the information in the break-even chart, at an output of 6,000 units, the total costs are £6,000. Therefore, the variable cost per unit can be calculated as:

$Variable\ Cost\ per\ unit = \frac{Total\ Costs}{Monthly\ Output} = \frac{£6,000}{6,000} = £1$

Step 3

Contribution per unit

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Answer

The contribution per unit can now be calculated using the formula:

$Contribution\ per\ unit = Selling\ Price\ per\ unit - Variable\ Cost\ per\ unit$

Substituting the values we have:

$Contribution\ per\ unit = £5 - £1 = £4$

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