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AQA GCSE Business includes calculation questions, primarily on Paper 2 (Finance), but data interpretation skills are needed on both papers. This lesson covers every formula you need to know, provides worked examples, explains how marks are awarded, and highlights the common mistakes that cost students marks every year.
Calculation questions typically carry 2–6 marks on Paper 2. They are some of the most predictable questions on the exam — if you know the formulas and can apply them, these are marks you can virtually guarantee.
| Advantage | Detail |
|---|---|
| Predictable | The same formulas come up repeatedly — there is a limited set of calculations on the specification |
| Method marks | Even if your final answer is wrong, you can earn marks for correct working |
| Quick marks | A 3-mark calculation can often be completed in 2–3 minutes |
| No subjectivity | Unlike analysis and evaluation, calculation answers are objectively right or wrong |
Key Point: Always show your working. AQA awards method marks as well as answer marks. If you make an arithmetic error but your method is correct, you can still earn most of the marks. If you only write the final answer and it is wrong, you score zero.
| Formula | |
|---|---|
| Revenue | Selling price per unit x Quantity sold |
Worked Example: A business sells 5,000 units at £12 each.
Key Point: Revenue is the total income from sales before any costs are deducted. It is sometimes called "turnover" or "sales revenue." Do not confuse revenue with profit — revenue does not account for any costs.
| Formula | |
|---|---|
| Total costs | Fixed costs + Variable costs |
| Variable costs (total) | Variable cost per unit x Quantity produced |
Worked Example: A business has fixed costs of £20,000. The variable cost per unit is £4 and it produces 8,000 units.
Key Point: Fixed costs do not change with the level of output (e.g., rent, insurance). Variable costs change in direct proportion to output (e.g., raw materials, packaging). Make sure you know the difference — AQA will test this.
| Formula | |
|---|---|
| Gross profit | Revenue - Cost of sales (cost of goods sold) |
Worked Example: A business has revenue of £200,000 and cost of sales of £120,000.
Key Point: Cost of sales (also called cost of goods sold) includes only the direct costs of producing the goods that were sold — raw materials, direct labour, manufacturing costs. It does not include overheads like rent, marketing, or administrative salaries.
| Formula | |
|---|---|
| Net profit | Gross profit - Other operating expenses and interest |
Worked Example: Gross profit is £80,000 and other operating expenses are £50,000.
Common Mistake: Students often confuse gross profit and net profit. Gross profit only deducts the cost of sales. Net profit deducts all business expenses, including overheads, administration, marketing, and interest. Net profit is always less than or equal to gross profit.
| Formula | |
|---|---|
| Gross profit margin (%) | (Gross profit / Revenue) x 100 |
Worked Example: Revenue = £200,000, Gross profit = £80,000.
What does it tell us?
| Formula | |
|---|---|
| Net profit margin (%) | (Net profit / Revenue) x 100 |
Worked Example: Revenue = £200,000, Net profit = £30,000.
What does it tell us?
Exam Tip: When you calculate a profit margin, always interpret it. Do not just state the number — explain what it means for the business. "The net profit margin is 15%" is AO1. "The net profit margin of 15% means the business retains 15p from every £1 of sales, which is below the industry average of 20%, suggesting that Company X has higher operating costs than its competitors" is AO1 + AO2 + AO3a.
| Formula | |
|---|---|
| Contribution per unit | Selling price per unit - Variable cost per unit |
| Break-even output | Fixed costs / Contribution per unit |
| Total contribution | Contribution per unit x Quantity sold |
| Margin of safety | Actual output - Break-even output |
Worked Example: A business has fixed costs of £30,000. It sells each unit for £10 and the variable cost per unit is £4.
If the business actually sells 7,000 units:
What does break-even tell us?
You may be asked to read or draw a break-even chart. Key features to remember:
| Line / Point | What It Shows |
|---|---|
| Fixed costs line | A horizontal line — fixed costs do not change with output |
| Total costs line | Starts at the fixed costs level on the y-axis and rises diagonally — total costs = fixed + variable |
| Revenue line | Starts at zero (origin) and rises diagonally — more output = more revenue |
| Break-even point | Where the total costs line and revenue line cross — the business makes neither profit nor loss |
| Margin of safety | The horizontal distance between the break-even point and the actual output level |
| Profit area | The region where revenue exceeds total costs (to the right of the break-even point) |
| Loss area | The region where total costs exceed revenue (to the left of the break-even point) |
Common Mistake: When reading a break-even chart, make sure you read the correct axis. Output (quantity) is on the x-axis (horizontal). Revenue and costs (£) are on the y-axis (vertical). Students frequently read the wrong value from the wrong axis.
| Formula | |
|---|---|
| Average annual profit (net) | Total net profit over the life of the investment / Number of years |
| Average rate of return (%) | (Average annual profit / Initial investment) x 100 |
Worked Example: A business invests £100,000 in new machinery. Over 5 years, the total net profit from the investment is £40,000.
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