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CAIE A-Level Business 5.4.4 Break-even Analysis

Practise calculating and interpreting contribution, break-even output, margin of safety and profit from figures or graphs and evaluating the technique's business usefulness and…

Syllabus
2026–2028
Course
Business 9609
Level
AS

Exam points

  • calculate unit contribution as selling price minus variable cost and break-even as fixed cost ÷ contribution
  • calculate margin of safety as actual or forecast output minus break-even output and interpret risk
  • evaluate break-even using demand uncertainty, changing costs, product mix and qualitative factors

5.4.4—Break-even analysis question 1

[Maximum number: 3]

Fizzy Drinks (FD)

FD is a private sector business that manufactures an international brand of carbonated drinks. Its slogan was 'A premium drink for premium customers'. The market for FD's drinks is very competitive, with 7 national and 12 international brands all competing in the same market. Recently FD lost the title of market leader to TR, one of its largest competitors. TR is a multinational public limited company.

Table 2.1 FD financial data 2023

Table 2.1 FD financial data 2023

Employee morale has dropped as a result of the negative feedback. Key employees have left to work for FD's competitors. The lack of experienced employees has led to a drop in the productivity of the production process.

Refer to Table 2.1. Calculate FD's margin of safety in 2023.

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