Practice 5.4 Location 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.
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 |
Calculate the net profit for the business.
Show all your working.
Calculate the net profit margin.
Show all your working.
Calculate the current ratio.
Show all your working.
Calculate the break-even output per month.
Show all your working.
Outline one factor that BiteFresh Ltd. should consider when choosing between the urban and rural location options.
SolvoHealth
| Metric | Vietnam (live) | Indonesia (pilot) |
|---|---|---|
| Avg. pod uptime | 94% | 71% |
| Avg. medicine delivery time | 26 hours | 61 hours |
| Navigator-reported escalations | 9.2/week | 18.4/week |
| Inventory out-of-stock events | 3.1/week | 7.5/week |
With reference to Resource 2, describe one HR issue that may impact SolvoHealth’s service performance.
Explain one marketing challenge and one operations challenge SolvoHealth may face as it expands across Indonesia and Bangladesh.
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for SolvoHealth over the next five years.
Global Solar Solutions (GSS)
With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.
Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.
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.
EcoHeat Ltd.
EcoHeat Ltd. is a company that manufactures solar-powered water heating systems. The business is currently planning to open a second production facility and is considering two possible locations:
The operations director, who follows a democratic leadership style, has asked team leaders to involve employees in the decision-making process. However, recent internal reports show declining employee motivation, and communication between departments has been inconsistent.
To support the location decision, the finance team produced a break-even chart for the new facility.
Figure 1: Break-even chart for proposed facility
Using Figure 1, identify the break-even level of output for EcoHeat Ltd.
Explain one advantage of involving employees in location decisions through democratic leadership.
Outline one way that poor communication between departments could impact the success of the new facility.
Explain one non-financial method EcoHeat Ltd. could use to improve employee motivation during the expansion process.
Using Figure 1, calculate the profit or loss if EcoHeat Ltd. produces and sells 7,000 units.
Show all your working.
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:
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 |
Calculate the net profit for ChillBrew Ltd. Show all your working.
Calculate the net profit margin. Show all your working.
Calculate the number of units ChillBrew Ltd. must sell to achieve a target profit of $5,000. Show all your working.
Calculate the current ratio. Show all your working.
Outline one factor ChillBrew Ltd. should consider when choosing between the two location options.
EcoHeat Ltd.
EcoHeat Ltd. is a company that manufactures solar-powered water heating systems. The business is currently planning to open a second production facility and is considering two possible locations:
The operations director, who follows a democratic leadership style, has asked team leaders to involve employees in the decision-making process. However, recent internal reports show declining employee motivation, and communication between departments has been inconsistent.
To support the location decision, the finance team produced a break-even chart for the new facility.
Figure 1: Break-even chart for proposed facility
Using Figure 1, identify the break-even level of output for EcoHeat Ltd.
Explain one advantage of involving employees in location decisions through democratic leadership.
Outline one way that poor communication between departments could impact the success of the new facility.
Explain one non-financial method EcoHeat Ltd. could use to improve employee motivation during the expansion process.
Using Figure 1, calculate the profit or loss if EcoHeat Ltd. produces and sells 7,000 units. Show all your working.
BerryBliss Ltd.
BerryBliss Ltd. is a growing business that produces frozen fruit snacks. The company recently decided to expand by opening a second production facility. Management is considering two potential locations: one in a rural area with lower rent, and one closer to the city with better access to transport links and suppliers.
BerryBliss currently uses a flat organizational structure, where communication flows easily and employees have wide spans of control. The company’s production manager follows a laissez-faire leadership style, allowing employees to take initiative in their daily work.
Table 1 shows cost and revenue data for one of BerryBliss’s snack products.
Table 1: Cost and revenue data per unit of BerryBliss snack
| Item | Amount ($) |
|---|---|
| Selling price per unit | 5.00 |
| Variable cost per unit | 2.00 |
| Fixed costs per month | 9,000 |
Identify two features of a flat organizational structure.
State two reasons why a business like BerryBliss might want to expand.
Calculate the break-even output.
Show all your working.
Identify one advantage and one disadvantage of a rural location for the new facility.
Explain one possible benefit of a laissez-faire leadership style in the context of production.
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:
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 |
Calculate the net profit for ChillBrew Ltd.
Show all your working.
Calculate the net profit margin.
Show all your working.
Calculate the number of units ChillBrew Ltd. must sell to achieve a target profit of $5,000.
Show all your working.
Calculate the current ratio.
Show all your working.
Outline one factor ChillBrew Ltd. should consider when choosing between the two location options.
AquaSphere Ltd.
AquaSphere Ltd. designs and manufactures compact water purification systems for use in developing countries. The company began as a small domestic manufacturer but has recently opened two international distribution centres in Southeast Asia and South America. Its long-term business objective is to increase access to clean water globally while maintaining financial sustainability.
To support this growth, AquaSphere Ltd. obtained a low-interest development loan and used a sale and leaseback arrangement to improve liquidity. The finance team is evaluating the financial viability of producing a new portable filter model at a new facility. Two location options are being considered:
AquaSphere's expansion into multiple markets has also introduced exchange rate risks, legal complexity, and new staffing challenges. The board is reviewing how well the company’s financial structure, operations decisions, and growth strategy align with its social mission and long-term objectives.
Table 1: Financial data for the new portable filter (per month)
| Item | Amount ($) |
|---|---|
| Fixed costs | 22,000 |
| Variable cost per unit | 8.00 |
| Selling price per unit | 18.00 |
| Maximum expected output | 5,000 units |
Explain how AquaSphere Ltd.’s choice of financing methods might influence its financial flexibility during international expansion.
Suggest one operational consideration and one financial consideration AquaSphere Ltd. should evaluate when choosing between Location A and Location B.
Draw a fully labelled break-even chart using the data in Table 1. Include the total cost line, total revenue line, and mark the break-even point.
Based on the chart, calculate the margin of safety if the company sells 4,500 units per month. Show all your working.
Explain how AquaSphere Ltd.'s growth might create tension between its social mission and business objectives.
EcoBlade Ltd.
EcoBlade Ltd. produces biodegradable razors aimed at environmentally conscious consumers. The company is deciding whether to invest in a second production site closer to its largest market.
Management is considering two investment projects and recently reviewed its operational performance.
Table 1: Income and Expenses for EcoBlade Ltd. – Year Ended 2024
(All figures in $m)
| Statement of Profit and Loss (excerpt) | |
|---|---|
| Revenue | 14.0 |
| Cost of goods sold | (9.0) |
| Gross profit | 5.0 |
| Operating expenses | (3.0) |
| Net profit before tax | 2.0 |
| Statement of Financial Position (excerpt) | |
|---|---|
| Current assets | 4.0 |
| Current liabilities | 2.0 |
| Current ratio | 2:1 |
Table 2: Investment Appraisal Data – Project A and Project B
(All figures in $m)
| Project | A | B |
|---|---|---|
| Initial investment | 5.0 | 5.0 |
| Net cash inflows: Y1 | 2.0 | 1.0 |
| Net cash inflows: Y2 | 2.0 | 2.0 |
| Net cash inflows: Y3 | 1.5 | 2.5 |
| ARR (over 3 years) | ___ | ___ |
| NPV (@10% discount) | $0.7 | $0.5 |
Additional context:
Calculate EcoBlade Ltd.'s net profit before tax
Calculate the ARR for both Project A and Project B.
Explain one advantage of using NPV instead of payback period alone for investment decision-making.
Distinguish between quality control and quality assurance using EcoBlade Ltd. as an example.
Outline one operational reason why EcoBlade Ltd. is considering locating its second factory near suppliers.