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CAIE IGCSE Business Studies 7.2 Production Questions

Practise production formulae using cost, output, productivity and break-even data, with working shown for each calculation.

Syllabus
2027–2029
Course
Business 0264

Exam points

  • calculate productivity, average cost or total variable cost from output and cost data
  • read break-even charts or figures to find output, revenue and margin of safety
  • define cost and break-even terms before applying them to production decisions

Covered syllabus points

7.2.1—Labour productivity7.2.2—Total variable cost7.2.3—Variable cost per unit7.2.4—Total cost7.2.5—Average cost7.2.6—Break-even output7.2.7—Contribution per unit7.2.8—Margin of safety

Question 1

[Maximum number: 2]

BEF is a large business based in country X. It uses flow production to manufacture a wide range of products including toothpaste and shampoo. All BEF's products are currently sold in country X. BEF knows that having effective methods of internal communication are important. The Operations Director is analysing production data. An extract is shown in Table 4.1. BEF is considering exporting its products to country Y.

Table 4.1

Table 4.1

Calculate output per worker per week in 2020. Show your working.

Question 2

[Maximum number: 2]

CTF is an ethical business. It manufactures a range of toys. CTF operates in a competitive market. Over the years technology has changed production at CTF. The Operations Manager is analysing break-even information. An extract of the cost and revenue data for product X is shown in Table 3.1. Following the closure of its local supplier, the Operations Manager is considering importing raw materials for product X.

Table 3.1

Table 3.1

Calculate the total variable cost for product X .

Show your working.

Question 3

[Maximum number: 2]

Nancy wants to be an entrepreneur. She has analysed market research data and decided to start up a book shop. Nancy has identified a suitable location and prepared a business plan. Nancy is calculating her total costs. She will use this information to help her complete a break-even chart as shown in Figure 2.1. Nancy is also considering using e-commerce.

Break-even chart for Nancy's new business

Break-even chart for Nancy's new business

Define 'total cost'.

Question 4

[Maximum number: 2]

MLC makes motorcycles. The Managing Director has been analysing MLC's costs. An extract of this information is shown in Table 2.1. To reduce average costs, MLC plans to close its factory and relocate production to another country. Only 50 of the existing employees will be offered jobs at the new location. The trade union has been informed. All the new employees will be given either on-the-job training or off-the-job training. This planned relocation will have an impact on MLC's income statement.

Table 2.1

Table 2.1

Calculate the average cost of one motorcycle. Show your working.

Question 5

[Maximum number: 2]

Calculate the break-even level of output for BW using the information in Appendix 2.

Question 6

[Maximum number: 2]

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

Table 3.1

Calculate the margin of safety for product X in 2020.

Show your working.

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