MHL manufactures tyres for large vehicles．It has factories in 6 countries．The business creates external costs when producing its products．Good communication with MHL＇s suppliers is important． The Managing Director knows globalisation provides many opportunities for MHL．She is reviewing data for one of MHL＇s factories as she wants to reduce the average cost of the tyres．An extract from this data is shown in Table 4．1．（b）Calculate total variable cost per month．Show your working． Working： Final answer：

Business

IGCSE&ALevel

CAIE

Exam No：0450_s25_qp_12 Year：2025 Question No：4(b)

Answer:

Award 2 marks for a correct answer.
Award 1 mark for correct method but incorrect answer.
Correct answer:
- $\$ 5$ million [2]
- 5 million $/ 5 \mathrm{~m}$ [2]
- 5000000 [2]

Correct method but incorrect answer e.g.
- Output $\times$ variable cost per unit [1]
- $200000 \times \$ 25$ [1]

If correct answer given with no working shown award 2 marks.

Knowledge points:

4.2.1.1. Classifying costs using examples, e.g. fixed, variable, average, total

4.2.1.2. Use cost data to help make simple cost-based decisions, e.g. to stop production or continue

4.2.2.1. The concept of economies of scale with examples, e.g. purchasing, marketing, financial, managerial, technical

4.2.2.2. The concept of diseconomies of scale with examples, e.g. poor communication, lack of commitment from employees, weak coordination

4.2.3.1. The concept of break-even

4.2.3.2. Construct, complete or amend a simple break-even chart

4.2.3.3. Interpret a given chart and use it to analyse a situation

4.2.3.4. Calculate break-even output from given data

4.2.3.5. Define, calculate and interpret the margin of safety

4.2.3.6. Use break-even analysis to help make simple decisions, e.g. impact of higher price

Answer:

Knowledge points:

Solution:

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