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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

From the break-even chart, the total revenue for selling lip balm at a monthly output of 6,000 units is £30,000. Therefore, the selling price per unit can be calculated as follows:

$\text{Selling Price Per Unit} = \frac{\text{Total Revenue}}{\text{Quantity}} = \frac{£30,000}{6,000} = £5$

Step 2

Variable Cost Per Unit

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Answer

The variable cost for producing 6,000 units is indicated to be £6,000. Thus, the variable cost per unit can be calculated as:

$\text{Variable Cost Per Unit} = \frac{\text{Total Variable Cost}}{\text{Quantity}} = \frac{£6,000}{6,000} = £1$

Step 3

Contribution Per Unit

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Answer

Finally, the contribution per unit can be calculated by subtracting the variable cost per unit from the selling price per unit:

$\text{Contribution Per Unit} = \text{Selling Price Per Unit} - \text{Variable Cost Per Unit} = £5 - £1 = £4$

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