Business 0450 · IGCSE · Costs, scale of production and break-even analysis

Costs, scale of production and break-even analysis — practice question

(a)[8]

Use the organisation chart shown in Appendix 2. Identify and explain the chain of command for BB and the span of control of Stella.

(b(i))[3]

On the break-even chart below, draw the Total Cost line, the Total Revenue line and the Break-even point. The break-even chart for the existing BB nursery each day shows: - Vertical axis marked "$" from 0 to 600. - Horizontal axis marked "Number of children per day" from 0 to 50. - A line labelled "VC" rising upward from the origin to around $400 at 50 children. - A horizontal line at about $100 labelled "FC". Additional information: Price = $12 per child per day. FC = Fixed cost. VC = Variable cost.

(b(ii))[9]

Consider two methods BB could use to lower this break-even output. Recommend the best option to choose. Justify your answer. Way 1. Way 2. Recommendation.

Worked solution & mark scheme

This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: Chain of command hierarchy

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