Practice 3.9 Budgets (HL only) 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 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 3
HLPaper 2
NutraBeam Ltd.
NutraBeam Ltd. is a health food company that produces organic protein powders and snack bars using renewable energy. The business relies on a batch production method to manufacture its goods and integrates a customised management information system (MIS) that monitors ingredient inventory levels, order fulfilment, and energy consumption in real time.
In Q2 2024, NutraBeam experienced a serious disruption when a contaminated shipment of chia seeds halted production for two weeks. This led to missed retailer delivery targets and negative media coverage. The company activated its crisis management plan, which included supplier audits, public transparency statements, and temporary outsourcing of production.
NutraBeam’s operations manager is now reviewing the company’s production planning, including safety stock levels and quality control procedures. Meanwhile, the finance department has compiled actual vs. budgeted performance data to assess the financial implications of the crisis.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted ($) | Actual ($) |
|---|---|---|
| Sales revenue | 1,800,000 | 1,540,000 |
| Cost of goods sold | 960,000 | 1,200,000 |
| Operating expenses | 520,000 | 540,000 |
| Net profit | 320,000 | –200,000 |
1.[2]
Calculate the total adverse variance in costs and the revenue variance for NutraBeam Ltd. in Q2 2024. Show all your working.
2.[2]
Comment on what these figures suggest about the financial impact of the production crisis.
3.[2]
Explain one weakness in NutraBeam’s production planning that may have contributed to the severity of the disruption.
4.[2]
Suggest one way NutraBeam could adapt its MIS to improve production resilience in the future.
5.[2]
Outline how budgeting can support better decision-making during and after a crisis.
Question 4
HLPaper 2
CoreByte Ltd.
CoreByte Ltd. is a medium-sized software company offering custom business platforms. The finance team recently reviewed the budget for 20XX and compared it to actual results. A summary is provided below.
To improve long-term employee motivation and reduce turnover, CoreByte Ltd. introduced a wider task variety for project teams and allocated a portion of company profits to an internal share ownership scheme. Senior leadership is divided between data-driven decision-making and intuitive approaches based on manager experience.
Table 1: Budget for CoreByte Ltd. for the period ended 2024
(All figures in $m)
| Revenue | Budgeted | Actual | Variance |
|---|---|---|---|
| Software subscriptions | 180 | 175 | 5 (A) |
| One-time custom projects | 60 | 70 | 10 (F) |
| Consulting and support | 30 | 25 | 5 (A) |
| Total revenue | 270 | 270 | 0 |
| Costs | Budgeted | Actual | Variance |
|---|---|---|---|
| Salaries and benefits | 100 | 110 | 10 (A) |
| Hardware and hosting | 25 | 20 | 5 (F) |
| Office rent | 15 | 15 | 0 |
| Marketing spend | 20 | 25 | 5 (A) |
| Utilities and admin | 10 | 12 | 2 (A) |
| Total costs | 170 | 182 | 12 (A) |
| Excess of revenue over costs | 100 | 88 | 12 (A) |
Additional data:
- Accounts receivable = $15 million
- Annual sales = $120 million
- CoreByte Ltd. has no long-term debts but is experiencing frequent short-term cash shortages.
1.[2]
Referring to Table 1, state: (i) Which revenue stream showed the most favourable variance (ii) Which cost item caused the largest adverse variance
2.[2]
Calculate CoreByte Ltd.'s debtor days
3.[2]
Explain one benefit and one limitation of using variance analysis for CoreByte Ltd.’s managers.
4.[2]
Explain how job enlargement and employee share ownership schemes may support employee motivation at CoreByte Ltd.
5.[2]
Distinguish between scientific and intuitive approaches to management decision-making, using CoreByte Ltd. as context.
Question 5
HLPaper 2
FlexiFreeze Ltd.
FlexiFreeze Ltd. is a medium-sized business that manufactures portable solar-powered refrigeration units for off-grid medical and disaster relief use. It was originally set up as a partnership but restructured into a private limited company (Ltd) after receiving a contract from an international NGO. The company’s business purpose is to deliver low-cost, high-impact refrigeration solutions to underserved communities while achieving sustainable long-term growth.
In Q2 2024, the business launched a new production facility to meet rising demand. While this supported its growth and evolution, it also strained liquidity. Some stakeholders, including suppliers and staff, have expressed concerns about delayed payments and overtime demands.
The finance team has provided the final income statement for Q2 2024 and a comparison with budgeted figures, alongside a cash flow forecast to assess short-term financial pressures.
Table 1: Budgeted vs Actual Income Statement – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 950,000 | 900,000 |
| Cost of goods sold | 520,000 | 580,000 |
| Operating expenses | 310,000 | 330,000 |
| Net profit | 120,000 | — |
Table 2: Cash Flow Forecast – July 2024
| Item | Amount (£) |
|---|---|
| Opening balance | 40,000 |
| Cash inflows | 250,000 |
| Cash outflows | 295,000 |
| Closing balance | — |
1.[2]
Explain one reason why FlexiFreeze Ltd. may have changed from a partnership to a private limited company.
2.[2]
Calculate the actual net profit for Q2 2024 Show all your working.
3.[2]
Comment on how the company’s cash flow and profit results might affect its relationship with stakeholders.
4.[2]
Suggest one risk FlexiFreeze Ltd. may face as it expands.
5.[2]
Outline how the company’s business purpose may influence strategic financial decisions as it grows.
Question 6
HLPaper 2
StormGuard Ltd.
StormGuard Ltd. manufactures storm-resistant roofing panels and supplies construction companies throughout Southeast Asia. In early 2024, the company faced severe supply chain disruptions after flash flooding damaged its main raw materials warehouse. As part of its crisis management and contingency planning, StormGuard activated an emergency supply agreement with an overseas provider at significantly higher cost.
The production manager has since reviewed the firm’s production planning systems, concluding that the business lacked adequate stock buffers and had underinvested in inventory forecasting software. Meanwhile, the finance team has finalised StormGuard’s Q2 financial accounts and reviewed its budget to assess the impact of the crisis.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted ($) | Actual ($) |
|---|---|---|
| Sales revenue | 1,500,000 | 1,420,000 |
| Cost of goods sold | 780,000 | 960,000 |
| Operating expenses | 420,000 | 450,000 |
| Net profit | 300,000 | 10,000 |
Table 2: Statement of Financial Position Extract – as at 30 June 2024
| Item | Amount ($) |
|---|---|
| Current assets | 290,000 |
| Current liabilities | 270,000 |
1.[2]
Calculate the total cost variance and the sales revenue variance for StormGuard Ltd. in Q2 2024. Show all your working.
2.[2]
Calculate the net profit margin and current ratio for StormGuard Ltd. using actual figures. Show all your working.
3.[2]
Explain how the variances and ratio results reflect the financial impact of the crisis.
4.[2]
Explain one weakness in StormGuard’s production planning that may have worsened the effects of the supply chain crisis.
5.[2]
Suggest one way StormGuard Ltd. could strengthen its budgeting and contingency planning to avoid similar disruptions in future.
Question 7
HLPaper 2
ClearWave Ltd.
ClearWave Ltd. is a UK-based start-up that designs and installs water purification systems for rural communities and NGOs. Its long-term business objectives include expanding into three African markets by 2026, maintaining ethical sourcing practices, and achieving an annual growth rate of 20%.
To support its growth and evolution, the company secured a government development grant, a bank loan, and retained profits. However, some stakeholders—particularly NGO clients and community partners—have raised concerns about whether expansion could compromise product quality and service support.
ClearWave’s finance team has shared Q2 2024 final accounts, alongside the business’s budgeted figures, to assess how growth pressures are impacting profitability.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 1,250,000 | 1,100,000 |
| Cost of goods sold | 600,000 | 670,000 |
| Operating expenses | 420,000 | 430,000 |
| Net profit | 230,000 | — |
1.[2]
Calculate the total cost variance and the sales revenue variance for ClearWave Ltd. in Q2 2024. Show all your working.
2.[2]
Calculate the actual net profit for Q2 2024. Show all your working.
3.[2]
Explain how ClearWave’s current financial performance may affect its ability to meet its growth objectives.
4.[2]
Suggest one internal and one external stakeholder group that may be concerned about the company’s expansion and explain why.
5.[2]
Suggest two additional sources of finance ClearWave Ltd. could consider to support future growth
Question 8
HLPaper 2
TerraNova Ltd.
TerraNova Ltd. is an agricultural technology company based in New Zealand that develops vertical farming systems for urban food production. The company has a strong innovative corporate culture that values experimentation, sustainability, and cross-functional collaboration. However, as TerraNova scaled operations to meet increasing demand, it introduced stricter performance targets across departments.
These changes, including the removal of flexible working arrangements in the production team, led to a deterioration in industrial relations. Employee representatives submitted a formal grievance to management, citing the lack of consultation and increased stress levels among staff. Senior leaders are now reviewing TerraNova’s budget and financial performance for Q2 2024 to assess whether further cost-cutting is needed.
The company is also exploring external sources of finance to fund a new training and automation programme aimed at improving long-term efficiency and reducing employee workload.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (NZD) | Actual (NZD) |
|---|---|---|
| Sales revenue | 2,400,000 | 2,200,000 |
| Cost of goods sold | 1,050,000 | 1,160,000 |
| Operating expenses | 920,000 | 980,000 |
| Net profit | 430,000 | 60,000 |
1.[2]
Calculate the sales variance and total cost variance for TerraNova Ltd. in Q2 2024. Show all your working.
2.[2]
Comment on how the variances and final accounts reflect the financial impact of TerraNova’s internal changes.
3.[2]
Explain how TerraNova’s corporate culture may have clashed with recent changes to working conditions.
4.[2]
Suggest one internal and one external source of finance TerraNova Ltd. could consider to fund its employee training and automation programme.
5.[2]
Outline how improved industrial relations could contribute to TerraNova’s long-term financial performance.
Question 9
HLPaper 2
LunoCare Ltd.
LunoCare Ltd. is a healthcare technology company that recently merged with a traditional medical device manufacturer. After the merger, the company faced tension between the tech team’s flexible leadership style and the acquired firm’s hierarchical culture.
The human resources department is implementing new performance review processes to support the integration and is piloting employee-driven feedback initiatives. Meanwhile, management has tied part of employee bonuses to company profitability this year.
Table 1. Draft statement of Profit and Loss of LunoCare Ltd. for 2023
| Statement of Profit and Loss for 2023 (in $'000) | |
|---|---|
| Revenue | 5,600 |
| Cost of goods sold (COGS) | (3,200) |
| Gross profit | ________ |
| Expenses | (2,000) |
| Net profit before tax | ________ |
Table 2. Draft statement of Financial Position of LunoCare Ltd. for 2023
| Statement of Financial Position for 2023 (in $'000) | |
|---|---|
| Non-current assets | 3,000 |
| Current assets | 1,200 |
| └── of which: Cash | 200 |
| Current liabilities | (1,000) |
| Non-current liabilities | (800) |
| Net assets | 2,400 |
Additional notes:
- Some employees expressed concern about how much data management uses in decision-making versus relying on leadership intuition.
- The finance director assigned departmental managers responsibility for controlling specific revenue and cost streams.
1.[2]
Calculate the missing figures for net profit before tax.
2.[2]
Outline one advantage of involving employees in providing feedback on their own performance.
3.[2]
Explain one potential cultural clash that may arise from LunoCare Ltd.’s recent merger.
4.[2]
State one reason why different stakeholders would be interested in LunoCare Ltd.'s financial accounts.
5.[2]
Identify one advantage of assigning departmental managers responsibility for both revenue and cost streams at LunoCare Ltd
Question 10
HLPaper 2
CinnaBean Ltd.
CinnaBean Ltd. is a regional café chain known for its cinnamon-based desserts. The business was founded by a sole trader who used personal funds and retained profits to grow. It is now expanding into new regions after seeing steady market growth and rising customer loyalty.
The finance team prepared budgeted and actual figures for Q1 across three locations. The CEO is considering turning each café into a profit centre to enhance accountability. Meanwhile, CinnaBean is reviewing its marketing strategy and whether it should remain product-focused or shift toward a more market-driven approach.
Table 1: Performance Summary – Q1 (figures in $000)
| Category | Budgeted | Actual | Variance |
|---|---|---|---|
| Revenue | 450 | 470 | 20 (F) |
| Cost of ingredients | 130 | 140 | 10 (A) |
| Staff wages | 100 | 90 | 10 (F) |
| Utilities | 30 | 35 | 5 (A) |
| Marketing spend | 50 | 40 | 10 (F) |
| Total cost | 310 | 305 | 5 (F) |
| Net profit | 140 | 165 | 25 (F) |
Additional information:
- All cafés are centrally supplied, but some locations have begun experimenting with local product variations.
- The owner is considering selling older equipment to fund tech upgrades.
- Current assets: 300,000.
- Market share in its home region rose from 12% to 15% over the past year; competitors are entering the same space.
1.[2]
Calculate CinnaBean Ltd.’s liquidity position using the current ratio
2.[2]
State two internal source of finance that could be used for new tech upgrades
3.[2]
Explain the difference between a cost centre and a profit centre using CinnaBean Ltd.’s cafés as context.
4.[2]
Identify one adverse and one favourable variance in Table 1
5.[2]
Explain one advantage for CinnaBean Ltd. of increasing its market share and becoming the market leader.