Business 0450 · IGCSE · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
FBM is a boat building business. It employs 100 skilled workers. The Operations Director is worried that FBM is holding too much inventory. She is also worried that the business is beginning to suffer diseconomies of scale. The Finance Director has been asked to examine FBM’s cost and output data. An extract is shown in Table 1.1.
(a)[2]
Define what is meant by ‘diseconomies of scale’.
(b)[2]
Identify two ways cost data can be used by a business to support decision-making.
Use 1:
Use 2:
(c)[4]
Identify four fixed costs a business could incur.
Fixed item 1:
Fixed item 2:
Fixed item 3:
Fixed item 4:
(d)[6]
Explain one benefit and one drawback to FBM of holding a high level of inventory.
Benefit:
Explanation:
Drawback:
Explanation:
(e)[6]
Do you think customers matter more than employees in the success of a business? 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: “Factors that make average costs rise once a business expands beyond a certain size” …