Business 0450 · IGCSE · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
After spotting a gap in the soft drinks market, Jerome created a low sugar drink. To launch the business and fund working capital, he borrowed $5000 from family and friends. Jerome runs the business as a sole trader. In order to advertise the product, Jerome gave away free samples in the town centre. During the first year, Jerome’s business sold 10 000 units. That figure is 200 units above his break-even output. Jerome is thinking about methods of raising added value.
(a)[2]
Identify two characteristics of a sole trader.
Feature 1:
Feature 2:
(b)[2]
Define ‘working capital’ in business terms.
(c)[4]
Outline two ways in which break-even information could assist Jerome’s business.
Way 1:
Way 2:
(d)[6]
Explain how each of the following could help Jerome to increase added value:
Change the packaging:
Use cheaper materials:
(e)[6]
Do you think giving out free samples is the best sales promotion method for a business when launching a new food product? 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: “Retains all the profit” …