Practise interpreting break-even charts by analysing cost and revenue assumptions, output decisions and the limits of using simplified chart data.
Irsi Chocolatier will need to consider many factors if it wants to introduce its new product of chocolate lollipops.
Analyse the limitations for Irsi Chocolatier of using break-even charts to decide whether it should sell the new product.
AO2 =3 marks AO3 =3 marks
A02
- Break-even charts make the assumption that all of the new chocolate lollipops will be sold
- The chart shows the costs for the chocolate lollipops as a straight line not taking into account other costs that may occur along the way
A03
- This could lead to false data as it does not take into account any wasted or damaged stock not sold
- This could lead to overspending if Irsi Chocolatier have not taken into account other costs or if customers do not like the new product
(6)
Level
Mark
Descriptor
0
No Rewardable material.
Level 1
1-2
- Limited application of knowledge and understanding of business concepts and issues to the business context. (AO2)
- Attempts to deconstruct business information and/or issues, finding limited connections between points. (AO3)
Level 2
3-4
- Sound application of knowledge and understanding of business concepts and issues to the business context although there may be some inconsistencies. (AO2)
- Deconstructs business information and/or issues, finding interconnected points with chains of reasoning, although there may be some logical inconsistencies. (AO3)
Level 3
5-6
- Detailed application of knowledge and understanding of business concepts and issues to the business context throughout. (AO2)
- Deconstructs business information and/or issues, finding detailed interconnected points with logical chains of reasoning. (AO3)