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IGCSE Business Studies

Home > Study Notes > IGCSE Business Studies
Published in: Business Studies
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Break even worksheet

Tan C / Kuching

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Qualification: Degree

Teaches: Mathematics, Physics, Science, Additional Math, Chemistry, Additional Maths

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  1. 1 Carina had invested $400 000 when she set up her computer manufacturing business. She was anxious to make a good return on this capital. She looked at the following break-even chart produced by her accountant. output Fig. (a) (i) Label the Total Revenue and Total Cost lines on the chart. [2] (ii) Which of the letters W, X, Y, Z represents the break-even volume? [1] (b) The chart includes variable costs and fixed costs. Explain what is meant by a 'fixed cost'. [2] (c) How useful is this break-even chart in making decisions in Carina's business?
  2. [5] Answer for question 1 1 (b) Fixed cost is a cost that is unrelated / not depend to output and is incurred as a result of the existence of a business [2]. An example of a fixed cost e.g. rent, insurance[l]. (c) Break-even chart shows the relationship between revenue and costs at different levels of output. Thus potentially very useful as it allows a prediction of the level of profit that can be expected at different output levels. However its usefulness in practice is much reduced because of the underlying assumptions that it is based upon. However it is an aid to decision making.

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