Costs, Break-Even & Production Scale (Cambridge (CIE) IGCSE Business)

After identifying a gap in the soft drinks market, Jerome developed a low sugar drink. He borrowed $5,000 from family and friends to start-up a business and to provide working capital. Jerome operates as a sole trader. To promote his product, Jerome handed out free samples in the town centre. In the first year, Jerome’s business sold 10,000 units. This is 200 units more than his break-even output. Jerome is considering ways to increase added value.

CHW manufactures electrical products including cameras. The business is developing new products.The Managing Director knows that the stage of the product life cycle can influence CHW’s marketing decisions about promotion. He is analysing data for one of its products. An extract is shown the below table.The business would also like to introduce flow production into the factory.

CTF is a public limited company. It manufactures beds using batch production. The Operations Director is using break-even analysis to calculate the margin of safety for children’s beds. An extract from CTF’s output data is the below table. The Operations Director wants to know how an increase in inflation might affect CTF. She knows there are many environmental pressures that a manufacturing business could respond to.

SSG manufactures mobile (cell) phones using batch production. Quality control is important. SSG has 130 employees who all receive on-the-job training. The Marketing Manager is analysing cost and output data for product X. An extract is shown in the below table. As product X is in the maturity stage of the product life cycle SSG is considering possible extension strategies.

FBW manufactures watches using job production. It employs 5 full-time production employees. Each worker is offered regular training. Last year FBW sold 600 watches. The Managing Director plans to use break-even analysis to help decide whether to increase the price of its products. FBW’s current break-even chart is shown below.

Paolo wants to start up a business making cakes. He plans to sell all of his products to a wholesaler. Paolo knows the packaging for his products will be important. He has prepared some financial and sales data. An extract from this data is shown in the below table. Paolo is considering using crowdfunding as a source of finance. He knows the business will also need working capital.

LCT manufactures cooking pots. It has 16 employees. As a small business LCT uses social media as its method of advertising. The owner, Carole, knows having a good brand image is important. She is analysing LCT’s break-even chart. This is shown in Fig. 2.1. Carole is considering possible ways to lower LCT’s break-even level of output.

TBX manufactures high-quality steel which is used to build railways. The method of production used allows TBX to benefit from economies of scale. The business holds a high level of inventory including iron ore. The Managing Director knows business activity could have an impact on the environment and is considering ways the business can contribute to sustainable development.

GHT is a public limited company. It produces steel products, including gates and garage doors. GHT has a flat organisational structure and a short chain of command. GHT has many stakeholder groups, including 600 employees. The Managing Director is considering introducing job rotation to improve employee motivation. He has also been analysing some financial data. An extract is shown in Table 3.1.

Table 3.1: Extract of revenue and cost data for one of GHT’s products (product X)

CHW manufactures electrical products,, including cameras. The business is developing new products. The Managing Director knows that the stage of the product life cycle can influence CHW’s marketing decisions about promotion. He is analysing data for one of its products. An extract is shown the below table. The business would also like to introduce flow production into the factory.

FBW manufactures watches using job production. It employs 5 full-time production employees. Each worker is offered regular training. Last year FBW sold 600 watches. The Managing Director plans to use break-even analysis to help decide whether to increase the price of its products. FBW’s current break-even chart is shown below.

LCT manufactures cooking pots. It has 16 employees. As a small business LCT uses social media as its method of advertising. The owner, Carole, knows having a good brand image is important. She is analysing LCT’s break-even chart. This is shown in Fig. 2.1. Carole is considering possible ways to lower LCT’s break-even level of output.