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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 of lip balm is provided in the break-even chart. It can be observed that the total revenue for 6,000 units is £30,000. Thus, the selling price per unit is calculated as:

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

Step 2

Variable Cost per Unit

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Answer

The variable cost per unit is derived from the total costs presented in the chart. At 6,000 units, total costs are £6,000. Therefore, the variable cost per unit is calculated as:

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

Step 3

Contribution per Unit

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Answer

The contribution per unit is determined by subtracting the variable cost per unit from the selling price per unit. The formula is as follows:

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

Therefore, the contribution per unit of one lip balm is £4.

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