Business 7115 · O Level · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
TWH produces a variety of toys through batch production. TWH’s Managing Director, Dylan, intends to invest in new technology in order to cut average costs. ‘It’s the only way to increase efficiency because I do not know how we can improve employees’ motivation’ he said. Dylan is unable to decide whether retained profits or a long term loan would be the better source of finance.
Table 1: 2014 figures
(a)[2]
What does ‘average cost’ mean?
(b)[2]
Calculate the output per employee per week in 2014.
(c)[4]
Identify and explain two possible advantages to TWH of batch production.
(d)[6]
Identify and explain two ways that TWH could raise the motivation of its employees.
(e)[6]
TWH can either use retained profits or a long term loan to finance the purchase of new technology. Which option do you recommend TWH should use? 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: “Total cost divided by the overall number of units produced” …