Practice 5.5 Break-even analysis 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 2
BrewBar Ltd.
BrewBar Ltd. is a business that sells premium cold brew coffee. The company is preparing to launch a new canned product aimed at university students and young professionals. The marketing team has developed a marketing plan that includes promotional campaigns on social media, revised packaging, and a new pricing strategy to position the drink as both affordable and high quality.
BrewBar is deciding between two potential locations for production:
- Location A: Close to a major city, with higher rent but easier access to distribution channels
- Location B: In a rural area, with lower rent but higher transport costs
To evaluate the financial viability of the launch, the finance team has created a break-even chart based on forecasted production and pricing.
Figure 1: Break-even chart for BrewBar Ltd.’s new canned cold brew
1.[2]
Using Figure 1, identify the break-even level of output for BrewBar Ltd.’s new product.
2.[2]
Explain one benefit of having a marketing plan when launching the new product.
3.[2]
Outline one element of the marketing mix that BrewBar Ltd. adjusted, and explain how it could help the business achieve its marketing objectives.
4.[2]
Explain one location factor BrewBar Ltd. should consider when choosing between Location A and Location B.
5.[2]
Using Figure 1, calculate the profit BrewBar Ltd. would earn if it sells 7,000 units.
Show all your working.
Question 2
SLPaper 2
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
1.[2]
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
2.[2]
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
3.[2]
Explain one way the company’s objective to increase market share could influence operational decisions.
Question 3
SLPaper 2
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 |
1.[2]
Calculate the net profit for the business.
Show all your working.
2.[2]
Calculate the net profit margin.
Show all your working.
3.[2]
Calculate the current ratio.
Show all your working.
4.[2]
Calculate the break-even output per month.
Show all your working.
5.[2]
Outline one factor that BiteFresh Ltd. should consider when choosing between the urban and rural location options.
Question 4
HLPaper 2
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 created a break-even chart based on estimated sales and production costs.
Figure 1: Break-even chart for FrostFuel Ltd.’s new tropical smoothie
1.[2]
Using Figure 1, identify the break-even level of output for FrostFuel Ltd.’s new smoothie.
2.[2]
Explain one reason why market research was important before launching the new product.
3.[2]
Outline one factor FrostFuel Ltd. should consider when choosing between Location A and Location B.
4.[2]
Explain one way that a marketing plan helps support the successful launch of a new product.
5.[2]
Using Figure 1, calculate the profit FrostFuel Ltd. would earn if it sells 10,000 units.
Show all your working.
Question 5
HLPaper 3
SolvoHealth
Resource 1 – Business model and service offering
SolvoHealth is a rapidly growing mobile health company based in Vietnam. It operates a network of telehealth pods—solar-powered kiosks placed in rural communities that allow patients to consult doctors remotely, order basic diagnostics, and schedule medicine delivery.
Each pod includes a screen, smart diagnostic tools, and a local “health navigator” who guides users. SolvoHealth employs:
40 health navigators (frontline staff)
15 remote doctors (contracted)
30 staff at its operations HQ in Ho Chi Minh City (marketing, product, supply chain, HR)
SolvoHealth positions itself as affordable, hyper-local, and technology-enabled. The leadership team now plans to launch 60 pods in Indonesia and Bangladesh over the next 18 months.
Resource 2 – Internal HR report
“Navigator turnover remains high at 28% annually. Interviews cite poor training, emotional fatigue, and a disconnect between field roles and central ops decisions. Navigators receive basic onboarding but no career pathway or local adaptation in training. They also report being treated more as hardware support than as care professionals.
Headquarters recently introduced a CRM-linked performance bonus system based on call completion and upsell conversions—but this has increased pressure on already fatigued staff.”
Resource 3 – Weekly Ops Brief (March 2025)
Visual suggestion: This operations table can be converted into a bar chart or dashboard screenshot to test interpretation skills.
| 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 |
Resource 4 – Brand perception audit (external)
In Vietnam, SolvoHealth scores high for accessibility and usefulness, but low for empathy and personalisation. Many patients feel “talked to” by doctors, not “heard.”
In Indonesia (pilot), users were confused by medical terms and unable to complete video sessions. 47% believed the navigator was “just a receptionist.”
A competitor, SehatNow, offers similar services but invests heavily in navigator-patient relationship-building and community health workshops to build trust.
Resource 5 - Email from Head of Marketing to CEO
Resource 6 – Slack thread
@Linh (HR): “One navigator resigned mid-shift—said she felt like a vending machine operator.”
@Dara (Marketing): “How are we still pushing bonuses on upsells when trust is crumbling?”
@Tung (Ops): “I’ll review the KPIs. But we can’t rebuild loyalty with posters.”
@Dara: “Maybe not. But we can’t scale a service that feels robotic either.”
*Note Slack is an internal team communications tool
1.[2]
With reference to Resource 2, describe one HR issue that may impact SolvoHealth’s service performance.
2.[6]
Explain one marketing challenge and one operations challenge SolvoHealth may face as it expands across Indonesia and Bangladesh.
3.[17]
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.
Question 6
HLPaper 2
EcoCrate Ltd.
EcoCrate Ltd. manufactures eco-friendly modular furniture. Management is considering two options: buying prefabricated parts from a supplier (CTB) or making parts internally (CTM). They are also assessing lean production methods and ways to reorganize production internationally.
Key Financial and Operational Data:
| Financial and Production Data for EcoCrate Ltd. |
|---|
| Fixed costs (in-house production) |
| Variable cost per unit (in-house) |
| Cost to buy (CTB) per unit from supplier |
| Selling price per unit |
| Expected sales volume |
Additional notes:
- Moving production offshore would reduce variable costs by 20%.
- Labour turnover after recent changes has risen to 20%.
Answer all the questions.
1.[2]
Calculate EcoCrate Ltd.’s break-even quantity based on current in-house production costs.
2.[2]
Calculate the margin of safety in units based on expected sales.
3.[2]
Calculate the cost difference between Cost to Buy (CTB) and Cost to Make (CTM) at the expected sales volume.
4.[2]
Explain one effect of outsourcing production compared to insourcing.
5.[2]
Suggest one reason why labour turnover may have increased at EcoCrate Ltd.
Question 7
HLPaper 3
Global Solar Solutions (GSS)
Resource 1 – Background of the social enterprise
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.
Resource 2 – Recent internal report on workforce issues
"High staff turnover and trainer burnout have increased over the past 12 months. Trainers, who work in remote villages for weeks at a time, report fatigue and a lack of recognition. Some have requested additional health support and clearer promotion opportunities."
The HR department suggested non-financial incentives such as increased job rotation and monthly feedback sessions but reported mixed engagement.
Resource 3 – Email from the Director of Rural Development (DRD)
To: nadira.khan@GSS.org
Subject: Expansion proposal
Dear Ms. Khan,
We are impressed by GSS’s impact. The Ministry would like to propose a contract to expand the solar program to 80,000 homes across North and West Africa over five years. Your team would need to train local technicians and build capacity in three new countries. Please note, the contract requires local sourcing of at least 60% of parts.
We will require an initial trial rollout in 5,000 homes and evidence of social impact.
Regards,
Director, DRD
Resource 4 – Extract from a marketing audit summary
GSS currently relies on word-of-mouth and NGO referrals. Its brand is associated with trust and affordability. However, a 2024 brand perception survey in new markets revealed low awareness and concerns about product durability compared to larger multinationals such as SolarX.
GSS’s marketing team is small (3 staff) and has no formal digital strategy. There is also no localized messaging for francophone West African markets.
Resource 5 – Operations update from the Head of Production
Our current facility is operating at 92% capacity. To meet a major scale-up, we would need to either expand production or outsource subassembly. We have identified two regional partners with experience in sustainable component manufacturing. However, we are concerned about quality assurance if we lose full process control.
Resource 6 – Excerpt from a local newspaper article
“Access to solar power has transformed daily life in remote villages. Children now study at night, families charge phones to access mobile banking, and kerosene usage has dropped. However, NGOs report that replacement parts for some GSS kits have been slow to arrive, creating frustrations in isolated regions.”
1.[2]
With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.
2.[6]
Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.
3.[17]
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.
Question 8
HLPaper 2
SpeedLine Ltd.
SpeedLine Ltd. manufactures electric scooters and recently expanded its operations across three regional production sites. As part of this expansion, the company shifted from a flat to a tall organizational structure to better manage communication and control. The operations director uses a democratic leadership style and encourages input from team leaders during weekly meetings. However, a recent internal audit revealed breakdowns in communication between regional managers and staff on the production floor.
To evaluate the financial feasibility of launching a new foldable scooter model, the finance team prepared a break-even chart based on forecasted sales and cost estimates.
Figure 1: Break-even chart for SpeedLine Ltd.’s new scooter
(a) Using Figure 1, identify the break-even level of output for SpeedLine Ltd.’s new product. [2]
(b) Explain one reason why the shift to a tall organizational structure may create communication problems within the business. [2]
(c) Outline one advantage and one disadvantage of a democratic leadership style in a multi-site organization like SpeedLine Ltd. [2]
(d) Explain one way that ineffective communication could affect the success of the new product launch. [2]
(e) Using Figure 1, calculate the profit SpeedLine Ltd. would earn if it sells 6,000 units.
Show all your working. [2]
1.[2]
Using Figure 1, identify the break-even level of output for SpeedLine Ltd.’s new product.
2.[2]
Explain one reason why the shift to a tall organizational structure may create communication problems within the business.
3.[2]
Outline one advantage and one disadvantage of a democratic leadership style in a multi-site organization like SpeedLine Ltd.
4.[2]
Explain one way that ineffective communication could affect the success of the new product launch.
5.[2]
Using Figure 1, calculate the profit SpeedLine Ltd. would earn if it sells 6,000 units.
Show all your working.
Question 9
HLPaper 2
FreshEats Ltd (FE)
FreshEats Ltd (FE) is a rapidly expanding healthy fast-food chain based in Australia. The company has recently experienced significant growth, opening numerous outlets nationwide. This expansion has led to changes in organizational culture, shifting from a family-oriented culture to a more profit-driven environment. Some employees feel alienated, resulting in tensions and declining morale.
FE’s expansion required significant investment, financed through debt, affecting the company's profitability and liquidity ratios. Recent financial analysis indicates decreasing liquidity, causing concern among stakeholders about FE’s short-term financial health.
FE management is considering franchising as an alternative growth strategy, believing it could improve both liquidity and operational efficiency. However, employees are worried franchising could negatively impact their job security and working conditions, increasing risks of industrial action.
FE currently faces uncertainty regarding how many units they need to sell to break even at the new locations. Accurate break-even analysis is critical for financial planning during the ongoing expansion.
1.[2]
Define the term ‘franchising’.
2.[4]
Explain two ways rapid growth may negatively affect FE’s organizational culture.
3.[4]
Explain two reasons why profitability ratios might improve while liquidity ratios worsen.
4.[4]
Calculate the break-even quantity for FE if fixed costs are USD 120,000, average selling price per unit is USD 8, and average variable cost per unit is USD 5. Show all working.
5.[10]
Recommend whether FE should pursue franchising as a growth strategy, considering industrial relations and financial factors.
Question 10
HLPaper 3
Alpha Robotics – Optimizing HR and Operations for Growth
Resource 1 – News Article
Alpha Robotics Struggles with HR and Operational Efficiency
Alpha Robotics, a technology firm specializing in AI-powered industrial robots, is experiencing rapid expansion as demand for automation increases globally. The company was founded in 2015 and has since grown to 2,500 employees across four locations: the United States, Germany, Japan, and India.
Key Challenges:
(1) HR management issues – Employees complain about unclear leadership, poor communication, and lack of motivation due to a highly hierarchical structure.
(2) Production inefficiencies – The company’s batch production method is increasing lead times and reducing product quality.
(3) Location challenges – With rising costs in the US and Germany, Alpha Robotics must decide whether to expand in India (lower labor costs) or develop a new R&D facility in Singapore.
CEO Daniel Carter is considering the following strategic changes:
(1) Restructuring the organization to improve communication and motivation.
(2) Shifting to lean production and just-in-time (JIT) inventory management.
(3) Relocating part of production to India or Singapore while maintaining efficiency.
Resource 2 – Internal HR Survey Results
Key Insights:
(1) Employees feel disconnected from leadership, affecting productivity.
(2) A lack of career growth opportunities is reducing motivation and increasing turnover.
(3) Middle management struggles with effective communication due to a rigid hierarchical structure.
| Issue | Percentage of Employees Concerned |
|---|---|
| Lack of leadership clarity | 42% |
| Poor communication from managers | 38% |
| Low motivation and workplace morale | 45% |
| Limited career advancement | 41% |
Resource 3 – Cost-Benefit Analysis for Production Relocation
Alpha Robotics – Cost Analysis for Facility Expansion
Key Considerations:
(1) India offers lower costs, but efficiency gains are lower compared to Singapore.
(2) Singapore provides greater efficiency but has significantly higher setup costs.
| Location | Labor Costs per Hour ($) | Setup Costs ($M) | Expected Efficiency Gains |
|---|---|---|---|
| India | 12 | 30 | 10% increase |
| Singapore | 22 | 50 | 18% increase |
1.[2]
Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.
2.[6]
Explain two operational challenges Alpha Robotics faces in improving production efficiency.
3.[17]
Using all the resources provided and your knowledge of business management, recommend a possible plan of action to improve both HR and operations management at Alpha Robotics.