Business 7115 · O Level · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
Keila runs a profitable small bakery. She wants to grow the business. One possibility is to open a café selling cakes and drinks in a well-known tourist area. Her main promotional plan is to hand out free samples. She has collected customer and cost data in Table 1. Some of the information was gathered through primary market research.
(a)[2]
What does ‘fixed costs’ mean?
(b)[2]
Calculate the predicted revenue per week for the new café.
(c)[4]
Identify and explain two advantages to Keila’s business of using free samples to promote it.
(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 ought to 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 or output changes” …