1. Topic 1.1 Spotting a business opportunity
Example question
© Pearson Education 2010
Edexcel GCSE Business Unit 1 Exam Preparation

2. Step 1: Read just the question
Question
Which of the following is an example of a variable cost for a pizza takeaway?
© Pearson Education 2010
Edexcel GCSE Business Unit 1 Exam Preparation

3. Step 2: Try to answer the question
Question
Which of the following is an example of a variable cost for a pizza takeaway?
Think:
What is the definition of a variable cost?
Try:
Jot down some examples of variable costs.
© Pearson Education 2010
Edexcel GCSE Business Unit 1 Exam Preparation

4. Step 3: Look at the answer options
Question
Which of the following is an example of a variable cost for a pizza takeaway?
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.
© Pearson Education 2010
Edexcel GCSE Business Unit 1 Exam Preparation

5. Step 3: Look at the answer options
Question
Which of the following is an example of a variable cost for a pizza takeaway?
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.
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).
© Pearson Education 2010
Edexcel GCSE Business Unit 1 Exam Preparation

6. Step 3: Look at the answer options
Question
Which of the following is an example of a variable cost for a pizza takeaway?
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.
© Pearson Education 2010
Edexcel GCSE Business Unit 1 Exam Preparation

7. Step 4: Eliminate the distractors
Question
Which of the following is an example of a variable cost for a pizza takeaway?
The answer options
a) Rent of business premises.
b) Cost of ingredients such as pizza bases.
Rent is a fixed cost; it has to be
paid regardless of the number of
pizzas produced or sold.
c) The insurance for the delivery van.
d) Cost of advertisement in a local paper.
© Pearson Education 2010
Edexcel GCSE Business Unit 1 Exam Preparation

8. Step 4: Eliminate the distractors
Question
Which of the following is an example of a variable cost for a pizza takeaway?
The answer options
a) Rent of business premises.
b) Cost of ingredients such as pizza bases.
Rent is a fixed cost; it has to be
paid regardless of the number of
pizzas produced or sold.
c) The insurance for the delivery van.
d) Cost of advertisement in a local paper.
© Pearson Education 2010
Edexcel GCSE Business Unit 1 Exam Preparation

9. Step 4: Eliminate the distractors
Question
Which of the following is an example of a variable cost for a pizza takeaway?
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.
© Pearson Education 2010
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.
Edexcel GCSE Business Unit 1 Exam Preparation

10. Step 4: Eliminate the distractors
Question
Which of the following is an example of a variable cost for a pizza takeaway?
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.
© Pearson Education 2010
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.
Edexcel GCSE Business Unit 1 Exam Preparation

11. Step 4: Eliminate the distractors
Question
Which of the following is an example of a variable cost for a pizza takeaway?
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.
© Pearson Education 2010
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.
Edexcel GCSE Business Unit 1 Exam Preparation

12. Step 4: Eliminate the distractors
Question
Which of the following is an example of a variable cost for a pizza takeaway?
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.
© Pearson Education 2010
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.
Edexcel GCSE Business Unit 1 Exam Preparation

13. Step 5: Arrive at the correct answer
Question
Which of the following is an example of a variable cost for a pizza takeaway?
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
© Pearson Education 2010
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.
Edexcel GCSE Business Unit 1 Exam Preparation

14. Step 5: Arrive at the correct answer
Question
Which of the following is an example of a variable cost for a pizza takeaway?
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
© Pearson Education 2010
Edexcel GCSE Business Unit 1 Exam Preparation