Business 0450 · IGCSE · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
MHL makes tyres for large vehicles and has factories in 6 countries. When it produces its goods, the business generates external costs. Strong communication with MHL’s suppliers is essential. The Managing Director knows that globalisation gives MHL many opportunities. He is examining data for one of MHL’s factories because he wants to cut the average cost of the tyres. An extract from this data is shown in Table 4.1.
(a)[2]
Define what is meant by ‘average cost’.
(b)[2]
Calculate total variable cost per month. Show your working.
(c)[4]
Outline two external costs MHL could create when making its products.
(d)[6]
Explain two opportunities globalisation offers MHL.
(e)[6]
Explain two methods of communication a business could use to contact its suppliers. Which method is most likely to be best? 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: “Divide total cost by total output” …