Cambridge IGCSE · Business Studies (0450)

Costs, scale of production and break-even analysis: Practice Questions

4 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Costs, scale of production and break-even analysis.

9 questions23 marksFree, no account

Question 1

1 mark

Which formula is used to calculate the Total Cost of production?

Question 2

1 mark

An enterprise currently produces and sells \( 1,000 \) units. If its calculated break-even point is \( 750 \) units, what is its margin of safety?

Question 3

1 mark

In financial terms, if a charitable enterprise has income that exceeds its expenditure, it is said to have recorded a:

Question 4

1 mark

Which of the following is the most likely example of a fixed cost for a small enterprise?

Question 5

2 marks

Identify two examples of variable costs that a local clothing manufacturer might incur during the production process.

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Question 6

6 marks

Analyze the impact on the margin of safety if a business decides to reduce its selling price while all other costs remain constant.

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Question 7

5 marks

A high-volume car assembly plant utilizes flow production. Analyze how a significant increase in automation (capital-intensive production) would impact the firm's total fixed costs and its break-even level of output.

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Question 8

3 marks

Costs, scale of production and break-even analysis
A local juice bar is reviewing its costs to improve profitability.
(a) Identify two examples of variable costs for a juice bar business.
(b) Explain how an increase in the price of fruit (a raw material) would impact the juice bar's break-even point.

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Question 9

3 marks

Costs, scale of production and break-even analysis
A small entrepreneur, Sarah, produces hand-made candles. Her monthly fixed costs are \$600. The variable cost to produce each candle is \$4, and she sells each candle for \$10.
(a) Define fixed costs.
(b) Define variable costs.
(c) Identify one example of a fixed cost for Sarah's business.

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