Business 0450 · IGCSE · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
Duckett produces cleaning products, including washing powder, by using a variety of chemicals. The Operations Director intends to move production to either country X or country Y. He explained: ‘Environmental pressures and tighter legal controls on marketing are the main reasons for relocating. Our output is at break-even and we cannot afford to pay our 450 workers the higher minimum wage of $8 per hour. A wide range of stakeholders will be affected.’
(a)[2]
What does ‘break-even output’ mean?
(b)[2]
Identify two environmental pressures that Duckett may need to deal with.
Pressure 1:
Pressure 2:
(c)[4]
Identify and explain two ways in which legal controls on marketing might affect Duckett.
Way 1:
Explanation:
Way 2:
Explanation:
(d)[6]
Identify and explain two ways in which the local community might be affected by Duckett’s relocation decision.
Way 1:
Explanation:
Way 2:
Explanation:
(e)[6]
Recommend which location Duckett should choose. Justify your answer, using the information in Table 2.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “The sales/output level at which total costs are equal to total revenue” …