Last Course Patisserie has the following financial information for the month of April. April Raw materials for each dessert £0.50 Packaging for each dessert £0.20 Fixed costs £2 730 Selling price for each dessert £2.00 (a) Using the information in Table 2, calculate the level of output required to break-even in April. You are advised to show your workings. (b) Using the information in Table 2, calculate the variable cost per dessert following the increase in the cost of raw materials.

GCSE Edexcel Business Revenue, costs and profits: Last Course Patisserie has the f

Last Course Patisserie has the following financial information for the month of April - Edexcel - GCSE Business - Question 5 - 2019 - Paper 1

Question 5

Last Course Patisserie has the following financial information for the month of April. April Raw materials for each dessert £0.50 Packaging for each dessert £0.20 ... show full transcript

Worked Solution & Example Answer:Last Course Patisserie has the following financial information for the month of April - Edexcel - GCSE Business - Question 5 - 2019 - Paper 1

Step 1

Using the information in Table 2, calculate the level of output required to break-even in April.

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Answer

To find the break-even output, we use the break-even formula:

ext{Break-even output} = \frac{\text{Fixed Costs}}{\text{Selling Price per dessert} - \text{Variable Cost per dessert}}

From the information given:

Fixed Costs = £2730
Selling Price per dessert = £2.00
Variable Cost per dessert = Raw materials (£0.50) + Packaging (£0.20) = £0.70

Now we can substitute these values into the formula:

ext{Break-even output} = \frac{2730}{2.00 - 0.70} = \frac{2730}{1.30} = 2100\text{ desserts}

Therefore, the level of output required to break-even in April is 2100 desserts.

Step 2

Using the information in Table 2, calculate the variable cost per dessert following the increase in the cost of raw materials.

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Answer

If the cost of raw materials increases by 4%, then:

New cost of raw materials = £0.50 + (4/100 * £0.50) = £0.50 + £0.02 = £0.52

Now, including the packaging cost, the new variable cost per dessert will be:

Variable Cost per dessert = New Raw Materials Cost (£0.52) + Packaging Cost (£0.20)

Thus:

ext{Variable Cost per dessert} = 0.52 + 0.20 = £0.72

So, the variable cost per dessert following the increase in the cost of raw materials is £0.72.

Last Course Patisserie has the following financial information for the month of April - Edexcel - GCSE Business - Question 5 - 2019 - Paper 1

Worked Solution & Example Answer:Last Course Patisserie has the following financial information for the month of April - Edexcel - GCSE Business - Question 5 - 2019 - Paper 1

Using the information in Table 2, calculate the level of output required to break-even in April.

Using the information in Table 2, calculate the variable cost per dessert following the increase in the cost of raw materials.

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