Business 0450 · IGCSE · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
TWH manufactures a variety of toys through batch production. Dylan, the Managing Director at TWH, intends to put money into new technology to bring down average costs. ‘It’s the only way to increase efficiency as I do not know how we can improve employees’ motivation’ he said. Dylan is unsure whether retained profits or a long term loan would be the better source of finance.
(a)[2]
What does ‘average cost’ mean?
(b)[2]
Calculate the output per employee per week in 2014.
(c)[4]
Identify and explain two possible advantages for TWH of using batch production.
(d)[6]
Identify and explain two ways in which TWH could raise the motivation of its employees.
(e)[6]
TWH can finance the purchase of new technology using either retained profit or a long term loan. Which option do you recommend TWH should choose? 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: “Total cost divided by the total number of units made” …