The Question … Ahmed owns a stationary manufacturing business. He has changed the prices of some of his products. Ahmed has also changed his paper supplier. Ahmed has collected some financial data. He has produced a table showing how costs and revenue have changed. The table shows some of Ahmed’s financial data.   Notebooks Diaries Year 1 Year 2 Year 3 Year 4 Items sold 5000 1000 6000 8000 Selling price per item £5 £8 £6 Total revenue £25000 £8000 £36000 £48000 Fixed costs £6000 £7500 £10000 Variable costs £2000 £24000 £16000 Break-even point 2000 1250 4000 2500 Discuss the impact of changes in costs and revenue on Ahmed’s business (8)

The table shows some of Ahmed’s financial data. Ahmed owns a stationary manufacturing business. He has changed the prices of some of his products. Ahmed has also changed his paper supplier. Ahmed has collected some financial data. He has produced a table showing how costs and revenue have changed. The table shows some of Ahmed’s financial data. What can you calculate from the table? Margin of safety Profit What else does the table show? Break even is lower Revenues are lower on notebooks and higher on diaries Cost per unit is lower (variable costs) Fixed costs have gone up.   Notebooks Diaries Year 1 Year 2 Year 3 Year 4 Items sold 5000 1000 6000 8000 Selling price per item £5 £8 £6 Total revenue £25000 £8000 £36000 £48000 Fixed costs £6000 £7500 £10000 Variable costs £2000 £24000 £16000 Break-even point 2000 1250 4000 2500 Discuss the impact of changes in costs and revenue on Ahmed’s business (8) This will mean providing evidence for your argument from the case study and including some ‘what if’s’, ‘however’, ‘this could lead to …’ etc. This is the ‘command word’ in the question. It indicates that the examiner is looking for a reasoned argument.

Example answer … Ahmed’s business is affected by changes in costs and revenues in a number of ways. In changing his paper supplier, Ahmed has been able to reduce his variable costs for each product. This means that the cost per unit for diaries or notebooks is lower. This has lowered his break even point even though his fixed costs have increased. Ahmed has increased the price of his notebooks which should have increased revenue. However, the number of notebooks sold has dropped significantly in year 2 resulting in a much lower revenue and a loss for the business on this product line. This could be due to customers not wanting to pay the new price. Ahmed has chosen to keep the price of his diaries the same and has increased the number of sales to make a good profit. He now has a good margin of safety of 5,500 on his diaries since the total sold was 8,000 and the break even was 2,500. Ahmed’s profit has increased from 13,000 in year 1 to 20,500 in year 2 following his changes in costs and revenues. This means that …. (explanation) + what effect does it have on the business? Do your calculation and explain why Showing that you have used the table to generate new information Case study