Business (AS & A Level) · May / June 2026 · Paper 23 · Question 2

Lucky Candles (LC) LC is a private limited company based in country J, specialising in the manufacture of high‑quality, eco‑friendly candles. Founded in 2018, LC has grown quickly by using a highly effective approach to place (distribution channels). LC sources raw materials from local and international suppliers. LC’s customers are mainly specialist retail shops (B2B) and online shoppers (B2C). LC operates in a dynamic market but is committed to supporting communities through job creation and sustainability. LC is seen by the local community as a valuable contributor to the local economy. LC has the production capacity to manufacture 500 000 candles per year and has 50 employees. LC has two products: ‘Plain Candles’, at a price of $7 each, and ‘Luxury Candles’, at a price of $8 each. LC sells twice as many Plain Candles compared to Luxury Candles. When allocating costs to each product, LC uses a full costing approach. Table 2.1 shows some key data for LC in 2025. Table 2.1 Key data for LC in 2025 Plain Candles Luxury Candles direct cost $0.75m $0.25m allocated indirect cost $1.00m $1.00m total cost $1.75m $1.25m output per year 300 000 150 000 average cost $5.83 $8.33 The owners have decided to convert LC to a public limited company. This will likely increase the value of their shares. However, the directors are concerned about this decision. 5 10 15 20

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