IB Business Management Topic 5.4 Location…

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.

(a) the net profit for the business.
Show all your working.

(b) the net profit margin.
Show all your working.

(e) Using the data provided, the profit FrostFuel Ltd. would earn if it sells 10,000 units. Show all your working.

(e) Using Figure 1, the profit or loss if EcoHeat Ltd. produces and sells 7,000 units.
Show all your working.

(e) one factor ChillBrew Ltd. should consider when choosing between the two location options.

(d) the break-even output per month.
Show all your working.

(e) one factor that BiteFresh Ltd. should consider when choosing between the urban and rural location options.

FrostFuel Ltd.

FrostFuel Ltd. is a company that produces natural, energy-boosting frozen fruit smoothies. As part of its launch strategy for a new tropical flavour line, the marketing team conducted primary market research using focus groups and in-store product sampling. Based on the results, they developed a marketing plan targeting university students and young professionals in urban areas.

The operations team is choosing between two potential factory sites:

Location A: Close to a major university, with high rent and excellent transport links
Location B: A rural warehouse with lower costs but longer delivery times to city centres

To assess the product's financial viability, the finance team produced the following break-even data based on estimated sales and production costs.

Table 1: Break-even data for FrostFuel Ltd.'s new tropical smoothie

Item	Value
Selling price (SP)	$22.72 per unit
Variable cost (VC)	$9.09 per unit
Fixed costs (FC)	$30,000 per period

Output is measured in units per period; costs/revenue are measured in $ per period.

(b) one reason why market research was important before launching the new product.

(c) one factor from the information given that FrostFuel Ltd. should consider when choosing between Location A and Location B.

(d) one way a marketing plan supports a successful product launch.

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.

(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.

(a) Using Figure 1, the break-even level of output for EcoHeat Ltd.

(b) one advantage of involving employees in location decisions through democratic leadership.

(d) one non-financial method EcoHeat Ltd. could use to improve employee motivation during the expansion process.

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 ($)
Revenue	480,000
Cost of sales	290,000
Expenses	130,000
Current assets	75,000
Current liabilities	60,000
Selling price ($/unit)	4.00
Variable cost ($/unit)	1.50
Fixed costs per month	10,000

(a) the net profit for ChillBrew Ltd. Show all your working.

(b) the net profit margin. Show all your working.

(c) the number of units ChillBrew Ltd. must sell to achieve a target monthly profit of $5,000. Show all your working.

(d) the current ratio. Show all your working.

(a) Using the break-even data in Table 1, the break-even level of output and what it represents.

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:

Location A: Near a port, with high rent but excellent access to suppliers and export markets
Location B: In a rural area, with lower rent but limited transport infrastructure and fewer skilled workers

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

Revenue	400,000
Cost of sales	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

IB Business Management 5.4 Location Questionbank

IB Business Management 5.4 Location Questionbank

IB Business Management 5.4 Location Questionbank

IB Business Management 5.4 Location Questionbank

IB Business Management Topic 5.4 Location Questionbank