909450 mcq topic_1

© Pearson Education 2010 Edexcel GCSE Business Unit 1 Exam Preparation

Example question

Topic 1.1 Spotting a business opportunity


Step 1: Read just the question

Question

Which of the following is an example of a variable cost for a pizza takeaway?


Step 2: Try to answer the question

Question


Think:

What is the definition of a variable cost?

Try:

Jot down some examples of variable costs.


Step 3: Look at the answer options

Question


The answer options

a) Rent of business premises.

b) Cost of ingredients such as pizza bases.

c) The insurance for the delivery van.

d) Cost of advertisement in a local paper.



Question


The answer options





1. Look at each answer option and think through the key element in relation to the definition you have rehearsed (i.e. rent, ingredients, insurance and advertising).



Question


The answer options

a) Rent of business premises variable or fixed?

b) Cost of ingredients such as pizza bases variable or fixed?

c) The insurance for the delivery van variable or fixed?

d) Cost of advertisement in a local paper variable or fixed?

2. Go through each option and note at the side whether you think it is a variable cost or a fixed cost.


Step 4: Eliminate the distractors

Question


The answer options





Rent is a fixed cost; it has to be paid regardless of the number of pizzas produced or sold.



Question


The answer options





Insurance is also a fixed cost – businesses have to pay insurance costs for fire, theft, public liability etc, regardless of the number of pizzas produced.



Question


The answer options





Advertising is a fixed cost; it does not depend on the amount produced – if the pizza takeaway spends £1000 on a set of leaflets advertising its pizzas it will have to pay this amount even if, as a result, it does not sell any extra pizzas.



Question


The answer options





Advertising is a fixed cost; it does not depend on the amount produced – if the pizza takeaway spends £1 000 on a set of leaflets advertising its pizzas it will have to pay this amount even if, as a result, it does not sell any extra pizzas.


Step 5: Arrive at the correct answer

Question


The answer options

a) Rent of business premises

b) Cost of ingredients such as pizza bases

c) The insurance for the delivery van

d) Cost of advertisement in a local paper

Ingredients are a variable cost – the more pizzas the takeaway make, the more pizza bases and toppings they require. The cost of bases and ingredients rises as the number of pizzas produced increases. The cost of ingredients are dependent on the amount produced and so represent a variable cost.


Step 5: Arrive at the correct answer

Question


The answer options

a) Rent of business premises

b) Cost of ingredients such as pizza bases

c) The insurance for the delivery van

d) Cost of advertisement in a local paper