Business 0450 · IGCSE · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
Tom set up ALB 5 years ago, and it makes trainers (sneakers) from sustainable materials like wool. One of ALB’s aims is to safeguard the environment. As part of his research, Tom worked out some costs that he could use for break-even analysis. An extract is shown in Figure 2.1. ALB distributes its products through retailers. Tom believes that a successful entrepreneur must also be a capable manager.
Figure 2.1 is a bar chart with these labels and percentages: retailers’ costs 50%, manufacturers’ profit 5%, fixed costs 15%, variable costs 30%. The horizontal axis is labelled percent and runs from 0 to 60.
(a)[2]
Define the term ‘variable costs’.
(b)[2]
Identify two limitations of break-even analysis.
(c)[4]
Outline two possible advantages to ALB of distributing its products through retailers.
(d)[6]
Explain one advantage and one disadvantage to ALB of making an effort to protect the environment.
(e)[6]
Do you think a successful entrepreneur needs to be a good manager? 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: “Expenses that vary with the level of output produced / sales made” …