IB Diploma Programme (DP) - SL & HL · Business management

3.3 Costs and revenues: Practice Questions

2 multiple-choice questions marked as you go, and 4 written questions with worked solutions. All on 3.3 Costs and revenues.

6 questions18 marksFree, no account

Question 1

1 mark

Costs that remain constant for a certain range of output but then increase to a higher level once that range is exceeded are defined as:

Question 2

1 mark

Which of the following is most likely to be classified as a fixed cost for a bakery?

Question 3

2 marks

Define the term semi-variable cost and provide one specific example of such a cost that a retail business might encounter.

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Question 4

6 marks

A software firm sells 1,000 licenses at $ \$200 $ each, with variable costs of $ \$40 $ per license and fixed costs of $ \$80,000 $. If the firm reduces the price by $ 20\% $ and the quantity sold increases by $ 30\% $, calculate the net change in total profit.

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Question 5

3 marks

A boutique bakery is analyzing its cost structure for the month of June. The following data is available:

- Monthly shop rent: $ \$2,500 $
- Insurance premiums: $ \$800 $
- Cost of ingredients per cake: $ \$5.00 $
- Packaging per cake: $ \$1.50 $
- Selling price per cake: $ \$20.00 $

Last month, the bakery produced and sold 400 cakes.

(a) Identify the total fixed costs for the bakery. [1]
(b) Calculate the total variable costs for the month. [1]
(c) Calculate the total revenue generated. [1]

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Question 6

5 marks

A digital media company provides a monthly subscription service for its premium content. Currently, the company has the following financial profile:

- Monthly subscription price: $ \$15 $
- Number of active subscribers: $ 1,000 $
- Variable cost per subscriber: $ \$3 $
- Monthly fixed costs: $ \$8,000 $

The marketing department proposes increasing the subscription price to $ \$18 $. They estimate that this price hike will cause the number of subscribers to fall to $ 850 $.

(a) Calculate the company's current monthly profit. [2]
(b) Calculate the forecasted monthly profit if the price is increased to $ \$18 $. [2]
(c) Based on your calculations, explain whether the company should implement the price increase. [1]

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