Business 7115 · O Level · Costs, scale of production and break-even analysis
Costs, scale of production and break-even analysis — practice question
SBL is a fast food restaurant that sells 900 chicken burgers every week. It employs 14 workers. The owner, Vicki, gives her employees training, but she does not make use of delegation at present. She is drawing up a break-even chart to work out SBL’s margin of safety. A partly finished break-even chart is shown in Fig. 3.1. Vicki would like to understand how an economic recession could influence her business.
Fig. 3.1 shows a break-even chart for SBL. The vertical axis is Costs/revenue $ and the horizontal axis is Output/sales per week (units). Label X indicates the point where the total cost and revenue lines cross (break-even point). Label Y indicates the revenue line close to the top-right of the chart.
(a)[2]
Identify X and Y on the chart.
(b)[2]
Define ‘margin of safety’.
(c)[4]
Outline two advantages of Vicki delegating tasks to her employees.
(d)[6]
Explain two possible effects an economic recession could have on Vicki’s business.
(e)[6]
Explain two methods of training a business might use. Which is likely to be the best method for a service business to 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: “the break-even point” …