Business 0450 · IGCSE · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
Gomez runs a small computer repair firm and manages it himself. Table 1 lists some of the costs and prices for his business. Because the market is competitive, Gomez understands that keeping customers loyal and revenue high matters. He also knows that a lower break-even point would improve profits. He believes the most effective way to reduce the break-even point is to increase prices.
(a)[2]
What does ‘revenue’ mean?
(b)[2]
What does ‘variable cost’ mean?
(c)[4]
Using the information in Table 1, produce a break-even chart for Gomez’s business.
(d)[6]
Identify and explain two methods Gomez could use to keep customer loyalty high.
(e)[6]
Gomez thinks raising prices is the best way to reduce the break-even point. Do you agree? Justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Income/money earned by the business from selling goods or services” …