Exam-style questions: Short answer and data response 1 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 cost 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. a Define variable costs. [2] b Identify two fixed costs that Sasha has. [2] c Outline two ways in which Sasha could reduce the break-even level of sales from her market stall. [4] d Explain two reasons why large jewellery manufacturers can produce jewellery at a lower average cost than Sasha can. [6] e Would you advise Sasha to close her market stall and open a shop instead? Justify your answer. [6] 2 Popsquash plc is one of the world's 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 efficiently. A new factory is planned for Country Z. An incomplete break-even chart is shown. 6 Sm costs revenue watable costs output milion units a Define 'fixed costs! [2] b Identify two variable costs that Popsquash plc has. [2] c Outline two reasons why a business being too big' can lead to higher average costs. [4 d Copy out and complete the break-even chart by adding: fixed costs of $2 million [1] total costs 2] (1) sales revenue assuming 4 million drinks are sold at $1.50 1] - the break-even point of production [1] profit made at 2 million drinks. e Explain two ways in which Popsquash plc could try to reduce the break- even level of output in the new factory, Recommend to the Chief Executive [6] which one the company should use, Justify your answer. S SHEE