Business 0450 · IGCSE · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
Cheung runs a small clothing retail outlet in the city centre that sells fashion wear for children. Because the market is highly competitive, Cheung understands that market research matters. He is concerned about how an increase in shop rent will affect his costs. Cheung commented: ‘I will have to pay this higher rent as it is a good location. I need to increase revenue or reduce costs.’ He sources all his supplies from a wholesaler in a nearby town. He is considering purchasing straight from a clothing manufacturer in another country.
(a)[2]
What does the term ‘market research’ mean?
(b)[2]
Identify what will happen to each of the following when Cheung’s shop rent rises.
Variable cost:
Fixed cost:
(c)[4]
Identify and explain two possible reasons why Cheung believes the shop is in a good location.
(d)[6]
Identify and explain two methods Cheung could use to raise revenue.
(e)[6]
Do you think Cheung should switch supplier? Support your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Process of identifying what consumers want or need before a product is produced” …