Practice 3.3 Costs and revenues with authentic IB Business Management exam questions for both SL and HL students. This question bank mirrors Paper 1, 2, 3 structure, covering key topics like systems and structures, human behavior and interaction, and sustainability and ethics. Get instant solutions, detailed explanations, and build exam confidence with questions in the style of IB examiners.
Paper
Level
Question 1
HLPaper 3
LuminaCare
Resource 1 – Company profile and financial context
LuminaCare is a Ghana-based, for-profit social enterprise that manufactures solar-powered medical devices for rural clinics and maternal health centers across Sub-Saharan Africa. Its flagship product is a solar fetal heart monitor, which allows midwives to detect complications during pregnancy without relying on grid electricity. The company raised seed capital from impact investors but has now reached an inflection point: demand has grown by 300%, and LuminaCare must decide whether to pursue a $2.5M Series A equity round or take on $1.2M in concessional debt from a development bank.
Resource 2 – CFO’s internal memo (Finance)
“Our burn rate is steady, but we’ve reached our credit limit with suppliers. We operate on 90-day payment terms with clinics, so cash flow is always tight. Series A equity gives us the scale to meet demand and build a second facility—but would dilute founder control and introduce board-level oversight. The concessional loan is low-interest and non-dilutive but comes with covenants: quarterly EBITDA targets, strict capex limits, and donor-style reporting. Any miss could trigger loan restructuring or early repayment.”
Resource 3 – HR performance dashboard (Q1–Q2 2025)
| Metric | Value |
|---|---|
| Staff turnover (last 6 months) | 22% |
| Time to fill technical roles | 49 days (↑ 24%) |
| % of roles with formal job descriptions | 58% |
| Managerial span of control | Avg. 12 direct reports |
| Avg. team engagement score | 67/100 (↓ from 78) |
| The head of HR notes that burnout and unclear career paths are leading to attrition, especially among product engineers and field deployment staff. |
Resource 4 – Marketing team proposal
“Clinics love our mission—but most have no idea who we are until we show up at trade shows. We need to invest in inbound marketing, including a multilingual website, CRM tools, and a referral rewards program for midwives. More crucially, we’re perceived as a donor-funded nonprofit, not a serious tech company. To attract hospital procurement officers and larger buyers, we must reposition the brand to emphasize product quality, not just affordability and ethics.”
Resource 5 – Email thread: CEO to CFO and Marketing Lead
Resource 6 – Feedback from key field partners
“We rely on LuminaCare’s devices, but their response time for repairs has worsened.” “Sometimes we get different pricing from different reps. There’s no standard process.” “I love the mission—but our procurement officer wants a brand that feels serious. A logo change isn’t enough.”
1.[2]
With reference to Resource 3, describe one HR issue that may be impacting LuminaCare’s ability to scale sustainably.
2.[6]
Explain one financial challenge and one marketing challenge LuminaCare may face if it accepts the concessional loan.
3.[17]
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for LuminaCare over the next five years.
Question 2
HLPaper 2
TerraVolt Ltd.
TerraVolt Ltd. is a European company specialising in the production of modular battery storage systems for renewable energy projects. After identifying an opportunity to expand into off-grid African markets, TerraVolt invested heavily in a new research and development (R&D) project to develop a lightweight, durable battery model.
However, unexpected production delays caused by supply chain disruptions forced TerraVolt to activate parts of its contingency plan, including outsourcing key components at higher costs. The finance team has prepared the company's final accounts and depreciation schedules to assess the financial impact and to plan for future investment needs.
Table 1: Statement of Profit or Loss for TerraVolt Ltd. for the year ending 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Sales revenue | 10,200 |
| Cost of sales | 6,300 |
| Gross profit | 3,900 |
| Operating expenses | 2,400 |
| Depreciation expense | 400 |
| Interest | 150 |
| Profit before tax | — |
| Tax | 150 |
| Profit for the year | — |
Table 2: Statement of Financial Position for TerraVolt Ltd. as at 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Non-current assets (at cost) | 2,000 |
| Accumulated depreciation | (800) |
| Current assets | 1,100 |
| Current liabilities | 750 |
| Long-term borrowings | 600 |
| Share capital | 700 |
| Retained earnings | — |
Additional information:
- The initial investment in machinery was €2,000,000.
- Machinery has an expected useful life of 5 years and a residual value of €0.
1.[2]
Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.
2.[2]
Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.
3.[2]
Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.
4.[2]
Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.
5.[2]
Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.
Question 3
SLPaper 2
BeanBar Ltd.
BeanBar Ltd. is a medium-sized company that sells gourmet coffee beans online and in retail stores. The business recently launched a new premium coffee blend and carried out primary market research to better understand customer preferences before the launch. The findings helped inform the company’s updated marketing plan, which included promotional discounts and revised packaging.
Although initial sales were strong, the marketing manager is concerned that poor internal communication between the finance and sales teams may be affecting financial performance. The finance team has noted rising costs, while the operations team wants to reinvest in product development.
Table 1 shows selected financial data for the past two months.
Table 1: Selected financial data for BeanBar Ltd. for 2024
| Item | Month 1 ($) | Month 2 ($) |
|---|---|---|
| Revenue | 100,000 | 90,000 |
| Cost of goods sold | 40,000 | 42,000 |
| Expenses | 30,000 | 35,000 |
| Net profit | ? | ? |
| Current assets | 60,000 | 50,000 |
| Current liabilities | 30,000 | 40,000 |
1.[2]
Calculate the net profit for Month 1 and Month 2. Show all your working.
2.[2]
Calculate the current ratio for Month 2. Show all your working.
3.[2]
Explain one reason why a fall in net profit might concern the finance team.
4.[2]
Identify one method of primary market research used by businesses like BeanBar Ltd.
5.[2]
Outline one problem that may arise from poor internal communication between departments.
Question 4
SLPaper 2
SoundBeam Ltd.
SoundBeam Ltd. is a fast-growing audio technology company that manufactures wireless speakers. The company recently restructured its internal operations by shifting from a flat to a tall organizational structure. This change was made to improve management oversight as the number of employees increased.
The CEO, who is known for her autocratic leadership style, believes that centralized decision-making is necessary to maintain control during expansion. To finance the development of a new product line, SoundBeam Ltd. used both a bank loan and retained profit.
The finance department has compiled the following figures from the most recent quarter.
Table 1: Financial data for SoundBeam Ltd.
| Item | Amount ($) |
|---|---|
| Revenue | 600,000 |
| Cost of goods sold | 320,000 |
| Expenses | 200,000 |
| Net profit | ? |
1.[2]
Identify two features of a tall organizational structure.
2.[2]
Calculate the net profit for the quarter. Show all your working.
3.[2]
Explain one reason why a business might change from a flat to a tall structure as it grows.
4.[2]
Explain one reason why understanding costs and revenues is important for financial planning.
Question 5
HLPaper 3
Elevate Health Tech (EHT)
Resource 1 – Background of the organization
Elevate Health Tech (EHT) is a social enterprise based in Peru. Founded in 2021 by two biomedical engineers, it develops low-cost, portable diagnostic devices (such as digital stethoscopes and glucose meters) for use in rural and underserved communities across Latin America. EHT reinvests all profits into R&D and local employment programs.
EHT has grown quickly, scaling from 5 to 38 employees in two years. It operates as a private limited company, with both founders holding equal ownership and decision-making authority.
Resource 2 – Statement from the HR Director
"Our team is motivated by our mission, but we’re facing growing pains. We’ve recently hired 12 new staff, many with limited technical background. We have no formal training programme or organizational structure. Employees report confusion about job roles, and productivity varies significantly across teams. The co-founders are very hands-on, but this is becoming unsustainable."
Resource 3 – Loan proposal from the Development Impact Bank (DIB)
DIB is prepared to offer EHT a $750,000 low-interest loan to expand production and distribution across four Andean countries. The loan would cover machinery upgrades and recruitment but requires EHT to submit quarterly financial statements and maintain a current ratio of at least 1.5 throughout the term.
A grace period of 18 months will apply before repayments begin.
Resource 4 – Excerpt from EHT’s financial summary (unaudited, 2024)
Note: Fixed assets are fully depreciated and no longer productive.
| Item | Amount (USD) |
|---|---|
| Current assets | $230,000 |
| Current liabilities | $180,000 |
| Non-current liabilities | $50,000 |
| Retained profit | $40,000 |
| Total equity | $100,000 |
Resource 5 – Email from the Head of R&D
"To remain competitive, we need to launch two new diagnostic products within the next 18 months. The current design lab is at capacity. We either need to lease a second lab or invest in automation. The team is overworked and we’ve lost two engineers to burnout. I’m also concerned about our lack of appraisal or performance review systems."
Resource 6 – Mission statement (from company website)
We believe affordable diagnostics are a human right. We exist to empower healthcare workers and communities with reliable tools, local jobs, and dignity-driven innovation.
1.[2]
With reference to the stimulus, describe one internal issue that might arise from EHT’s current ownership structure.
2.[6]
Explain one human resource challenge and one financial challenge that EHT may face if it accepts the DIB loan and scales up
3.[17]
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for EHT over the next five years.
Question 6
SLPaper 2
ChillBrew Ltd.
ChillBrew Ltd. produces canned cold brew coffee for retail and online sale. The company is planning to expand production by opening a second facility. Management is deciding between two potential locations:
- Location A is in a city centre, with higher rent but closer to suppliers and major distribution hubs.
- Location B is in a rural area, offering cheaper rent but with higher transportation costs and fewer skilled workers.
To support the decision, the finance team has reviewed the company’s recent performance and calculated the cost structure for a new product line.
Table 1: Financial data for ChillBrew Ltd.
| Item | Amount ($) |
|---|---|
| Revenue | 480,000 |
| Cost of goods sold | 290,000 |
| Expenses | 130,000 |
| Current assets | 75,000 |
| Current liabilities | 60,000 |
| Selling price per unit | 4.00 |
| Variable cost per unit | 1.50 |
| Fixed costs per month | 10,000 |
1.[2]
Calculate the net profit for ChillBrew Ltd. Show all your working.
2.[2]
Calculate the net profit margin. Show all your working.
3.[2]
Calculate the number of units ChillBrew Ltd. must sell to achieve a target profit of $5,000. Show all your working.
4.[2]
Calculate the current ratio. Show all your working.
5.[2]
Outline one factor ChillBrew Ltd. should consider when choosing between the two location options.
Question 7
SLPaper 2
Green Haven Ltd. (GH)
Green Haven Ltd. (GH) is a small private limited company that produces indoor hydroponic garden kits. GH was started by two former biology teachers with the aim of promoting sustainable food production in urban homes.
Initially, GH was funded through personal savings and a bank loan. In its first year of operation, GH earned $240,000 in revenue and incurred $160,000 in total costs. GH now aims to expand and is considering applying for a government grant to help fund the purchase of new machinery.
Table 1 shows selected financial information for GH.
Table 1: Selected financial data for GH
| Item | Amount ($) |
|---|---|
| Revenue | 240,000 |
| Total costs | 160,000 |
| Net profit | ? |
| Loan interest (annual) | 5,000 |
| Owner investment | 40,000 |
1.[2]
Define the term business.
2.[2]
Identify two characteristics of a private limited company (Ltd).
3.[2]
Calculate GH’s net profit for its first year of operation.
Show all your working.
4.[2]
State one short-term and one long-term source of finance GH is using or considering.
5.[2]
Explain one benefit for GH of having a social objective, such as promoting sustainable food production.
Question 8
HLPaper 2
TrekPro Ltd.
TrekPro Ltd. is a growing company specializing in outdoor equipment, selling products both locally and internationally. The management has implemented lean production techniques such as Just-in-Time (JIT) and kaizen to boost productivity.
Below are excerpts of TrekPro Ltd.'s final accounts for 2024.
Table 1. Excerpt of TrekPro Ltd.'s Statement of Profit and Loss 2024 (in $'000)
| ($'000) | |
|---|---|
| Revenue | 2,400 |
| Cost of goods sold (COGS) | _______ |
| Gross profit | 1,200 |
| Expenses | (700) |
| Net profit before tax | _______ |
Table 2. Excerpt of TrekPro Ltd.'s Statement of Financial Position 2024 (in $'000)
| (in $'000) | |
|---|---|
| Non-current assets | 1,500 |
| Current assets | 600 |
| Current liabilities | (300) |
| Net assets | _______ |
Additional data:
- Total labour hours worked: 20,000 hours.
- Total output produced: 8,000 units.
- Total operating costs: $2,000,000.
- TrekPro Ltd. introduced kaizen and JIT this year to improve efficiency.
1.[2]
Calculate the missing figures for: (i) Cost of goods sold (COGS) (ii) Net assets
2.[2]
Calculate the labour productivity rate in units per labour hour.
3.[2]
Define operating leverage and what it implies for TrekPro Ltd.
4.[2]
Identify one benefit of using Just-in-Time (JIT) for TrekPro Ltd.
5.[2]
Suggest one stakeholder who would be interested in TrekPro Ltd.'s financial statements
Question 9
SLPaper 2
BiteFresh Ltd.
BiteFresh Ltd. is a company that produces ready-made healthy meals for supermarkets and gyms. Due to growing demand, the business is planning to open a second production facility. Management is deciding between two locations: one in an urban area with higher rent but closer to suppliers and customers, and another in a rural area with lower operating costs but limited infrastructure.
The finance team has produced updated financial data to help evaluate the company’s performance and support the location decision.
Table 1: Financial data for BiteFresh Ltd.
| Item | Amount ($) |
|---|---|
| Revenue | 400,000 |
| Cost of goods sold | 220,000 |
| Expenses | 130,000 |
| Fixed costs (per month) | 12,000 |
| Selling price per unit | 10 |
| Variable cost per unit | 4 |
| Current assets | 70,000 |
| Current liabilities | 35,000 |
1.[2]
Calculate the net profit for the business. Show all your working.
2.[2]
Calculate the net profit margin. Show all your working.
3.[2]
Calculate the current ratio. Show all your working.
4.[2]
Calculate the break-even output per month. Show all your working.
5.[2]
Outline one factor that BiteFresh Ltd. should consider when choosing between the urban and rural location options.
Question 10
SLPaper 2
StylePoint Ltd.
StylePoint Ltd. is a clothing company with 30 employees. The company’s CEO uses a democratic leadership style, encouraging staff to contribute ideas and participate in decision-making. Recently, the company introduced team-based bonuses to increase employee motivation.
Table 1 shows selected financial information for StylePoint Ltd. from last year.
Table 1: Selected financial data for StylePoint Ltd.
| Item | Amount ($) |
|---|---|
| Fixed costs | 80,000 |
| Variable costs | 120,000 |
| Revenue | 250,000 |
| Gross profit | 130,000 |
| Current assets | 100,000 |
| Current liabilities | 50,000 |
1.[2]
State two features of a democratic leadership style.
2.[2]
Identify two non-financial methods of motivation other than bonuses.
3.[2]
Calculate StylePoint’s total costs.
Show all your working.
4.[2]
Calculate the current ratio for StylePoint Ltd.
Show all your working.
5.[2]
Explain one reason why gross profit is important to a business like StylePoint.