36 exam-style questions on Costs and revenues — topic 3.3 of Finance and accounts in the IB Business Management syllabus — with answers and explanations. Samples below; the full set is free with an account.
A firm's rent, insurance and salaried managers' pay stay the same whether it produces 0 units or 10 000 units. State the category these costs belong to.
Answer: Fixed costs
Fixed costs do not change with the level of output in the short run; rent, insurance and salaries are classic examples.
A product sells for 40 per unit with variable costs of 24 per unit. Fixed costs are 96 000. Calculate the break-even quantity in units.
Answer: 6 000 units
Contribution per unit = 40 − 24 = 16; break-even = fixed costs ÷ contribution = 96 000 ÷ 16 = 6 000 units.
A business sells 5 000 units at 30 each. Variable costs are 18 per unit and fixed costs are 45 000. Calculate the total profit.
Answer: 15 000
Total contribution = (30 − 18) × 5 000 = 60 000; profit = contribution − fixed costs = 60 000 − 45 000 = 15 000. Stopping at 60 000 gives total contribution, not profit; 150 000 is revenue.
The contribution per unit is 8 and fixed costs are 24 000. The firm currently sells 5 000 units. Calculate the margin of safety in units.
Answer: 2 000 units
Break-even = 24 000 ÷ 8 = 3 000 units; margin of safety = actual sales − break-even = 5 000 − 3 000 = 2 000 units.
A firm's contribution per unit is 15 and it wishes to make a target profit of 45 000 with fixed costs of 30 000. Calculate the number of units it must sell.
Answer: 5 000 units
Units for target profit = (fixed costs + target profit) ÷ contribution = (30 000 + 45 000) ÷ 15 = 5 000 units.
A firm increases its selling price while fixed costs and variable cost per unit stay the same. Determine the effect on the break-even quantity.
Answer: It falls
A higher price raises contribution per unit; break-even = fixed costs ÷ contribution, so a larger denominator lowers the break-even quantity.
That was 6 of 36 Costs and revenues questions.
Practise all 36 freeDistinguishAO2 · 4–6 marks
Make the difference clear for BOTH terms — a definition of one of them is only half an answer.
DefineAO1 · 2 marks
Give the precise meaning — one sentence, the key terms in it, no example needed unless asked.
OutlineAO1 · 2 marks
A brief account or summary: the main points in two or three sentences, no evaluation.
36 Costs and revenues questions — free with an account. Spaced repetition, streaks and full exam simulations included.
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