Business 0450 · IGCSE · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
Keila runs a thriving small bakery shop. She wants to grow the business and could set up a café that sells cakes and drinks in a busy tourist area. Her main promotional plan is to hand out free samples. She has collected some customer and cost data, as shown in Table 1. Keila used primary market research to obtain some of this information.
(a)[2]
What is meant by ‘fixed costs’?
(b)[2]
Calculate the forecast revenue per week for the new café.
(c)[4]
Identify and explain two advantages to Keila’s business of using free samples as a method of promotion.
(d)[6]
Identify and explain one advantage and one disadvantage to Keila’s business of using primary market research.
(e)[6]
Do you think Keila should open the new café? Justify your answer using the information in Table 1.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Expenses that do not vary when the level of activity / output / sales changes” …