Evaluate break-even limitations including constant costs, prices and sales mix, linear assumptions, uncertain demand, changing inputs and real-world complexity.
Source for use with Extract D Game, set and match Each year, Wilson produces 100 million tennis balls at its factory near Bangkok, Thailand. The factory covers an area of 11,000 m2 and operates 24 hours a day. Although it looks simple, a tennis ball goes through 24 stages during the production process. These stages include: • crushing rubber to form a core for the ball • cutting the core to size • cutting felt into shapes to wrap around the rubber core • joining the rubber core and felt shapes using glue. Rubber used to make the tennis balls is sourced from Thailand, as well as imported from nearby Asian countries such as Vietnam and Malaysia. Machinery is used for many of the stages but employees are needed to operate the machinery and to carry out some of the more complex and skilful tasks. One of these is wrapping the felt around the rubber core as this is more accurate when done by hand. Wilson supplies tennis balls to many of the professional tennis tournaments that take place around the world each year. The most tennis balls supplied for a single tournament are for the French Open and the US Open. These tournaments each use 70,000 tennis balls. Each ball must meet a strict specification, according to weight, size and hardness. The materials must be consistent to meet the requirements of the International Tennis Federation.
Extract D Game, set and match Each year, Wilson produces 100 million tennis balls at its factory near Bangkok, Thailand. The factory covers an area of 11,000 m2 and operates 24 hours a day. Although it looks simple, a tennis ball goes through 24 stages during the production process. These stages include: • crushing rubber to form a core for the ball • cutting the core to size • cutting felt into shapes to wrap around the rubber core • joining the rubber core and felt shapes using glue. Rubber used to make the tennis balls is sourced from Thailand, as well as imported from nearby Asian countries such as Vietnam and Malaysia. Machinery is used for many of the stages but employees are needed to operate the machinery and to carry out some of the more complex and skilful tasks. One of these is wrapping the felt around the rubber core as this is more accurate when done by hand. Wilson supplies tennis balls to many of the professional tennis tournaments that take place around the world each year. The most tennis balls supplied for a single tournament are for the French Open and the US Open. These tournaments each use 70,000 tennis balls. Each ball must meet a strict specification, according to weight, size and hardness. The materials must be consistent to meet the requirements of the International Tennis Federation.
Analyse two limitations for Wilson of using break-even analysis.
Knowledge 2, Application 2, Analysis 2
Knowledge
Up to 2 marks for defining break-even, e.g.
- The point at which total costs (1) are equal to total revenue
(1)
OR
For stating up to two limitations, e.g.
Application
Up to 2 marks for answers contextualised to Wilson, e.g.
- Wilson produces 100 million tennis balls at its factory in Thailand each year (1)
- A tournament such as the US Open uses 70,000 tennis balls
Analysis
Up to 2 marks for reasons/causes/consequences for Wilson, e.g.
- Costs of materials are unlikely to be constant for each ball sold,
meaning the break-even point will not be accurate (1)
- Due to the high volume of tennis balls demanded, Wilson may offer discounts on large orders (1)
(6)
Question
Discuss whether an appreciation in the Thai Baht ($) will benefit Wilson
Indicative content