Practice IB Business Management Topic 5.2 Operations Methods with authentic exam-style questions for both SL and HL students. This question bank focuses on the exact syllabus content for 5.2 Operations Methods and mirrors Paper 1, 2, 3 style where relevant.
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Global Solar Solutions (GSS)
(a) With reference to business management motivation theory, one need that GSS satisfies for rural households requiring solar lighting.
(b) one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.
Bruna Textiles (BT)
Bruna Textiles (BT) is a privately held company based in Porto, Portugal. BT manufactures workwear - protective coveralls, jackets and aprons - for clients in food processing, construction and healthcare. BT uses batch production. Every client orders garments to its own specification: fabric weight, colour, pocket layout and the client's logo. BT holds no finished-goods stock and produces only against confirmed orders. BT's order pattern for is shown in Table 1.
BT buys its fabric new from Portuguese mills. No mill in Portugal currently supplies recycled workwear fabric at the fabric weights BT's clients specify.
BT sells about garments a year. Workwear of this kind is normally replaced after about three years, so roughly BT garments are in use at any one time. Once a garment is sold, BT has no further contact with it. Garments are fitted to the individual wearer and carry the employer's logo.
Rising fabric prices, and new Portuguese rules requiring large employers to report the textile waste they send to landfill, have led BT's board to consider two options for . BT can afford only one.
Option . BT would pay a collection contractor to take back worn BT garments from client sites, sort them, repair and re-dye them, and sell them as a lower-priced refurbished range. Hygiene rules prevent food-processing and healthcare clients from buying refurbished garments; construction clients may buy them, and BT would also sell the range through a wholesaler to small builders, landscaping firms and waste-handling firms outside its present client base. The collection contractor charges the same amount for every garment whatever its condition. BT's repair staff estimate that about one garment in six needs more than twice the average repair time. To reach the planned output of garments a year, BT would have to offer wholesale buyers a discount on the price shown in Table 2. Forecast costs and price for Option are shown in Table 2.
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(e) Using Figure 1, the profit earned if FreshBurst Ltd. produces and sells 6,000 units. Show all your working.
(e) how budgeting can support better decision-making during and after a crisis.
(e) With reference to the data, on the break-even output per month, and whether this target seems realistic given the company’s current performance. Show all your working.
(c) Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for GSS over the next five years.
FreshBurst Ltd.
FreshBurst Ltd. is a rapidly expanding company that produces natural fruit juices. The company began as a small family business but has experienced significant internal growth over the past three years. Its long-term business objective is to increase market share in the premium health drink sector.
Recently, it invested in new equipment to transition from job production to batch production, aiming to improve efficiency and meet rising demand.
The finance team has created a break-even chart to support a proposal for further investment in production facilities. Senior managers are also considering how the expansion may impact stakeholder groups.
Figure 1: Break-even chart for FreshBurst Ltd.’s new product line
(a) Using Figure 1, the break-even level of output for FreshBurst Ltd.’s new product.
(b) one advantage of using batch production for FreshBurst Ltd. as it grows.
(c) one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
(d) one way the company’s objective to increase market share could influence operational decisions.
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 sales | 960,000 | 1,200,000 |
| Operating expenses | 520,000 | 540,000 |
| Net profit | 320,000 | –200,000 |
(a) the total adverse variance in costs and the revenue variance for NutraBeam Ltd. in Q2 2024.
Show all your working.
(b) on what these figures suggest about the financial impact of the production crisis.
(c) one weakness in NutraBeam’s production planning that may have contributed to the severity of the disruption.
(d) one way NutraBeam could adapt its MIS to improve production resilience in the future.
TerraForge Ltd.
TerraForge Ltd. is a manufacturing business that produces modular, eco-friendly building materials. The company operates as a private limited company (Ltd) and has gained attention for its innovative processes and sustainability-focused business model. It currently uses batch production but is exploring flow production to meet increasing demand.
To fund a planned expansion, TerraForge Ltd. recently secured a government innovation grant and is also considering whether to issue new shares or take on debt financing. However, the finance team has highlighted concerns about rising fixed costs and narrowing profit margins. The managing director has made operational efficiency and cost control key business objectives for the next fiscal year.
The finance department has produced the following summary of last quarter's figures:
Table 1: Financial data for TerraForge Ltd. (Q4 2024)
| Item | Amount ($) |
|---|---|
| Revenue | 950,000 |
| Cost of sales | 570,000 |
| Operating expenses | 320,000 |
| Net profit | ? |
| Current assets | 140,000 |
| Current liabilities | 100,000 |
| Fixed costs (monthly) | 90,000 |
| Variable cost per unit | $12 |
| Selling price per unit | $24 |
(a) the net profit for Q4 2024.
Show all your working.
(b) how the figures in Table 1 reflect TerraForge Ltd.’s current cost structure, and what this might imply about its operational priorities.
(c) one advantage and one drawback of using a government grant as a source of finance for a company like TerraForge Ltd.
(d) two reasons why TerraForge Ltd. might be considering a shift from batch to flow production.
