Business 7115 · O Level · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
LCT makes cooking pots and employs 16 people. Being a small firm, LCT advertises through social media. The owner, Carole, understands that a strong brand image matters. She is studying LCT’s break-even chart, which appears in Fig. 2.1. Carole is thinking about ways to reduce LCT’s break-even output level.
(a)[2]
Identify two drawbacks of break-even analysis.
(b)[2]
Calculate LCT’s profit when it sells 800 units. Show your working.
(c)[4]
Outline two possible gains for LCT from having a strong brand image.
(d)[6]
Explain two ways LCT could reduce its break-even level of output.
(e)[6]
Do you think social media is the most suitable advertising method for a small business? 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: “Treats all costs as if they were straight lines” …