Business 0450 · IGCSE · Costs, scale of production and break-even analysis

Costs, scale of production and break-even analysis — practice question

(a(i))[2]

Calculate the break-even level of output for BW from the data in Appendix 2.

(a(ii))[2]

Calculate the margin of safety for BW from the information in Appendix 2.

(a(iii))[4]

Identify four ways break-even analysis can be useful to a business.

(b)[12]

Consider the following three options for BW. Which option should Bob choose to improve BW’s reputation? Justify your answer. Option 1: Use cleaning products that contain chemicals Option 2: Use bottles that can be refilled with cleaning products Option 3: Purchase a new window washing machine

Worked solution & mark scheme

This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: The break-even output formula is Break-even output = Fixed cost / (Price - Variable cost per unit)

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