Which of the following is an example of a fixed cost?
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B. Rent Rent is a fixed cost because it remains constant regardless of the level of production. The best distractor is C. Wages for production workers, as these are variable costs that change with production levels.
What is an economy of scale?
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A. A reduction in average costs as production increases This is the definition of economies of scale. The best distractor is B, which describes diseconomies of scale.
Which of the following is an example of a diseconomy of scale?
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C. Poor communication between departments This is an example of a diseconomy of scale, which occurs when a business grows too large. The best distractor is A, which is an example of an economy of scale.
What is the break-even point?
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A. The point at which total revenue equals total costs This is the definition of the break-even point. The best distractor is B, which describes the point of maximum profit.
What is the margin of safety?
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A. The difference between the break-even point and the current level of output This is the definition of the margin of safety. The best distractor is B, which describes profit.
Which of the following is a limitation of break-even analysis?
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B. It assumes that prices and costs remain constant This is a limitation of break-even analysis. The best distractor is A, which is not a limitation as break-even analysis considers both fixed and variable costs.
Which of the following is an example of a variable cost?
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C. Raw materials Raw materials are a variable cost because they change with the level of production. The best distractor is A, which is a fixed cost.
What is the main advantage of economies of scale?
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A. They allow a business to reduce its average costs This is the main advantage of economies of scale. The best distractor is B, which is not an advantage as it would lead to a loss of customers.
Which of the following is an example of a financial economy of scale?
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D. Ability to borrow money at lower interest rates This is an example of a financial economy of scale. The best distractor is A, which is a purchasing economy of scale.
What is the break-even output for a business with fixed costs of £10,000, a selling price of £50 per unit, and variable costs of £30 per unit?
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B. 1,000 units Break-even output can be calculated using the formula: Fixed Costs / (Selling Price - Variable Costs). In this case, £10,000 / (£50 - £30) = 1,000 units. The best distractor is A, which is half the correct answer.
Which of the following is an example of a technical economy of scale?
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C. Access to better technology This is an example of a technical economy of scale. The best distractor is B, which is a managerial economy of scale.
What is the main disadvantage of diseconomies of scale?
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A. They lead to an increase in average costs This is the main disadvantage of diseconomies of scale. The best distractor is B, which is not a disadvantage as diseconomies of scale do not necessarily lead to a decrease in output.
Which of the following is an example of a managerial economy of scale?
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B. Improved division of labour This is an example of a managerial economy of scale. The best distractor is A, which is a purchasing economy of scale.
What is the break-even revenue for a business with fixed costs of £20,000, a selling price of £100 per unit, and variable costs of £60 per unit?
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A. £40,000 Break-even revenue can be calculated using the formula: Fixed Costs / (1 - Variable Cost Ratio). In this case, £20,000 / (1 - 0.6) = £50,000. The best distractor is B, which is the break-even output multiplied by the selling price.
Which of the following is an example of a marketing economy of scale?
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D. Ability to advertise more effectively This is an example of a marketing economy of scale. The best distractor is A, which is a purchasing economy of scale.