Practice IB Business Management Topic 5.4 Location with authentic exam-style questions for both SL and HL students. This question bank focuses on the exact syllabus content for 5.4 Location and mirrors Paper 1, 2, 3 style where relevant.
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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 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 |
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.
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:
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.
Using the break-even data in Table 1, calculate the break-even level of output and state what it represents.
Explain one reason why market research was important before launching the new product.
Outline one factor from the information given that FrostFuel Ltd. should consider when choosing between Location A and Location B.
Explain one way a marketing plan supports a successful product launch.
Using the data provided, calculate the profit FrostFuel Ltd. would earn if it sells 10,000 units. Show all your working.
Global Solar Solutions (GSS)
Three years ago, electrical engineer and entrepreneur Nadira Khan founded Global Solar Solutions (GSS) as a social enterprise in Morocco. Her goal was to provide affordable, modular solar lighting kits to off-grid rural communities. These kits, manufactured at GSS’s urban facility, include rechargeable LED lights and mobile charging ports. GSS reinvests 100% of profits into R&D and local hiring.
GSS operates in partnership with local NGOs and community councils. Its workforce includes 40 technicians and 20 community trainers who educate households about solar usage and maintenance. GSS applies lean production, Kaizen, and maintains a strong internal emphasis on quality control and after-sales support.
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 ($) |
|---|---|
| Revenue | 480,000 |
| Cost of sales | 290,000 |
| Expenses | 130,000 |
| Current assets | 75,000 |
| Current liabilities | 60,000 |
| Selling price ($/unit) | 4.00 |
| Variable cost ($/unit) | 1.50 |
| Fixed costs per month | 10,000 |
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 monthly 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.