Question

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]
3​

Answer 1

Costs

Explanation

1. Define variable cost

The cost which can be changed by time as per according to the produced product is known as variable cost.

  2. Identify two fixed costs that Sasha has

1. Rent
2. Interest Expenses

3.Outline two ways in which Sasha could reduce the break-even level of sales from her market stall

1. Reduce fixed cost.
2. Improves the sales mix.

4.Explain two reasons why large jewellery manufacturers can produce jewellery at a lower average cost than Sasha can

1. Because she do not have the enough space to add more of the equipments.
2. Also she was receiving the small amount as per to the product quality and her sales.

5.Would you advise Sasha to close her market stall and open a shop instead? Justify your answer

1. Yes i would advise her to open a shop because

• It would give more and more sales to her.
• People who see shops with a good quality always go attracted to them.
• Also she saw a fall in her sales that's why for more earning she have to open a shop.
• She have got an empty place and with that an opportunity also.