Business 7115 · O Level · 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. He borrowed $5000 from family and friends to finance the start-up and to supply working capital. Jerome runs the business as a sole trader. To advertise his product, Jerome gave out free samples in the town centre. During the first year, Jerome’s business sold 10 000 units. This is 200 units above his break-even output. Jerome is thinking about different ways to raise added value.
(a)[2]
Identify two characteristics of a sole trader.
(b)[2]
Define ‘working capital’ in words.
(c)[4]
Outline two ways in which break-even information may support Jerome’s business.
(d)[6]
Explain how each of the following could help Jerome increase added value:
Change the packaging.
Use cheaper materials.
(e)[6]
Do you think giving away free samples is the best sales-promotion method for a business promoting 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” …