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1.4 Production, costs, revenue and profit

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Question 58

A manufacturer of insulation panels expands its annual output to 500,000 panels. It keeps a £4 million loan throughout the year.

Table 1 shows changes following the expansion.

ItemBefore expansionAfter expansion
Interest rate on the loan7.0%4.5%
Additional annual management and administration costs£0£140,000

Assume that all other costs are unchanged.

Calculate the change in average cost per panel caused by the lower interest rate and the additional management and administration costs.

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Markscheme

1.4 Production, costs, revenue and profit Questions

  1. GCSE
  2. /Economics
  3. /1.4 Production, costs, revenue and profit

138 exam-style questions on AQA GCSE Economics 1.4 Production, costs, revenue and profit, covering 1.4.1a Business objectives, 1.4.1b Types of costs and revenue, 1.4.1c Calculating profit, 1.4.1d Profit as an incentive to produce, 1.4.1e Moral and ethical considerations, 1.4.2a Production versus productivity, 1.4.2b Factors and benefits of productivity, 1.4.3a Economies of scale and business behaviour, 1.4.3b Types of economy of scale, and 1.4.3c Diseconomies of scale. Each one has a worked solution and a mark scheme showing where the marks go.

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