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A Car manufacturer produces three models of Vehicle, X, Y, and Z. It has calculated the costs of these three
products to be:
X Y Z
Sasha rents a market stall selling jewellery. She makes most of the jewellery herself but she also buys in
items from large manufacturers. her only other variable costs is the pay of her sales assistant who receives a
small payment for each item she sells. Sasha wants to expand her business and she has found out that there is
an empty shop near her home. The fixed costs of the shop are three times greater than those of the market
stall.
3. Popsquash PLC
Popsquash plc is one of the worlds largest makers of soft drinks. Sales have increased in recent years but
profits have not. Rising fixed and variable costs have meant that higher sales revenue has not led to higher
profits. the chief Executive recently said: Perhaps the company is just too big to manage efficienctly. A new
factory is planned for Coutnry Z. An incomplete break-even chart is shown
3 Gino runs a take-away pizza business. He has estimated that he can produce as many as For
1000 pizzas per week although he is only selling 700 on average at present. Gino recently Examiners
looked again at his costs and prices. These are shown in Table 1. Use
Table 1
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(b) (i) Draw a breakeven chart to show Ginos weekly revenue and costs.
[6]
Calculate: For
Examiners
(ii) How many pizzas Gino has to sell to break even. Use
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(iii) Ginos annual profit when he sells 700 pizzas per week.
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Using your profit figure from (b)(iii) calculate the return on capital employed.
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(d) Ginos business is currently profitable. He thought that this meant it would be profitable For
for the next few years as well. What do you think? Examiners
Use
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1 GK Hotel is a small hotel in the city centre. It has 15 rooms. Most of its customers are tourists. Last
year the number of customers fell due to changes in consumer spending patterns and increased
competition. The Marketing manager believes GK must attract customers from different market
segments if the hotel is to increase its profits. His plan is to improve the GK website. He is not sure
whether he should change the cost plus pricing method he uses.
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(b) Identify two reasons why consumer spending patterns might change.
Reason 1: .................................................................................................................................
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Reason 2: .................................................................................................................................
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(c) Using the information in Table 1, draw a break-even chart for GK Hotel on Figure 1. [4]
Figure 1
10 000
9000
8000
7000
6000
costs and
revenue
5000
($ per month)
4000
3000
2000
1000
Benefit 1: ...................................................................................................................................
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Explanation: ..............................................................................................................................
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Benefit 2: ...................................................................................................................................
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Explanation: ..............................................................................................................................
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(e) Do you think that cost plus pricing is the best pricing method for GK Hotel to use? Justify your
answer.
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