Practice 5.6 Production planning (HL only) 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.
EcoForge Ltd. is a UK-based company that manufactures energy-efficient building materials. To improve competitiveness, EcoForge has adopted a lean production strategy, including just-in-time (JIT) inventory systems and total quality management (TQM) initiatives. As part of its production planning review, the company is investing in new software to better align production schedules with customer orders.
EcoForge Ltd. plans to expand into the European market by opening a new manufacturing plant. The finance team has compiled key efficiency and financial data for 2024 to evaluate whether the company should fund this expansion internally or seek external sources of finance.
Table 1: Selected Financial Data – EcoForge Ltd. (2024)
| Item | Amount (£) |
|---|---|
| Revenue | 7,500,000 |
| Cost of goods sold | 4,400,000 |
| Operating expenses | 2,600,000 |
| Net profit | 500,000 |
| Average stock | 550,000 |
Explain one way total quality management (TQM) can support lean production at EcoForge Ltd.
Calculate the stock turnover ratio for EcoForge Ltd.
Show all your working.
Comment on what the stock turnover ratio result suggests about EcoForge Ltd.’s operational efficiency.
Suggest one internal and one external source of finance EcoForge Ltd. could use to fund the new plant.
Analyse how improved production planning could support EcoForge Ltd.’s financial and strategic goals.
NexaHealth Equipment Ltd.
NexaHealth manufactures advanced diagnostic scanners for hospitals. Each scanner requires 72 imported components sourced using a just-in-time (JIT) model. NexaHealth spends £7.2 million annually on R&D, equal to 12% of its £60 million annual revenue, to maintain its innovation lead.
Last quarter, a global semiconductor shortage caused a six-week production delay, resulting in:
To manage this risk, the COO has proposed switching to a just-in-case (JIC) model for critical components, which would increase annual inventory holding costs by £1.5 million but reduce delay risk to below 1%. The operations team instead suggests investing £4.2 million in automation and adopting lean production and TQM practices to reduce dependency on external suppliers.
Identify the stock control method currently used by NexaHealth.
Explain how NexaHealth’s proposed JIC-based contingency plan could affect the business in terms of cost and risk.
Analyse how NexaHealth’s proposed conflict resolution and recruitment strategies could help reduce labour turnover.
Using the stimulus and your knowledge of business management, evaluate which strategy NexaHealth should prioritise to improve operational resilience and long-term competitiveness.
TerraVolt Ltd.
TerraVolt Ltd. is a European company specialising in the production of modular battery storage systems for renewable energy projects. After identifying an opportunity to expand into off-grid African markets, TerraVolt invested heavily in a new research and development (R&D) project to develop a lightweight, durable battery model.
However, unexpected production delays caused by supply chain disruptions forced TerraVolt to activate parts of its contingency plan, including outsourcing key components at higher costs. The finance team has prepared the company's final accounts and depreciation schedules to assess the financial impact and to plan for future investment needs.
Table 1: Statement of Profit or Loss for TerraVolt Ltd. for the year ending 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Sales revenue | 10,200 |
| Cost of sales | 6,300 |
| Gross profit | 3,900 |
| Operating expenses | 2,400 |
| Depreciation expense | 400 |
| Interest | 150 |
| Profit before tax | — |
| Tax | 150 |
| Profit for the year | — |
Table 2: Statement of Financial Position for TerraVolt Ltd. as at 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Non-current assets (at cost) | 2,000 |
| Accumulated depreciation | (800) |
| Current assets | 1,100 |
| Current liabilities | 750 |
| Long-term borrowings | 600 |
| Share capital | 700 |
| Retained earnings | — |
Additional information:
Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.
Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.
Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.
Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.
Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.
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.
ZenMoto Ltd.
ZenMoto Ltd. is a Japanese company that manufactures electric scooters designed for city commuting. To improve operational efficiency, ZenMoto has implemented lean production techniques such as just-in-time (JIT) inventory management, kaizen (continuous improvement), and quality circles across its factories. It is also reviewing its production planning processes to better match seasonal demand fluctuations.
The company plans to expand into new Southeast Asian markets and needs funding for a new manufacturing plant. The finance department has provided key efficiency data and is evaluating whether internal cash flows are sufficient or if external sources of finance are needed.
Table 1: Selected Financial Data – ZenMoto Ltd. (2024)
| Item | Amount (¥) |
|---|---|
| Revenue | 8,500,000,000 |
| Cost of goods sold | 5,200,000,000 |
| Operating expenses | 2,700,000,000 |
| Net profit | 600,000,000 |
| Capital employed | 5,000,000,000 |
Explain one way lean production techniques could improve ZenMoto Ltd.'s operational efficiency.
Calculate the return on capital employed (ROCE) for ZenMoto Ltd. Show all your working.
Comment on how ZenMoto Ltd.’s ROCE result might influence its decision to use internal or external finance for expansion.
Suggest one internal and one external source of finance ZenMoto Ltd. could consider for the new manufacturing plant.
Suggest how improvements in production planning could contribute to better financial performance at ZenMoto Ltd.
RapidFit Gym
RapidFit Gym is a small chain of fitness centers offering affordable memberships and group classes. The company has seen consistent growth over the past five years but is now facing increased competition from boutique fitness studios and online fitness platforms.
RapidFit is considering investing in a new gym location or upgrading its existing facilities to attract more members. The management is also concerned about operational inefficiencies, particularly with inventory management for gym equipment and receivables from corporate clients who pay for bulk memberships.
The following financial data is provided for the year ending December 31, 2023:
| Financial Metric | Value (USD) |
|---|---|
| Revenue | 2,000,000 |
| Cost of Goods Sold (COGS) | 1,200,000 |
| Operating Expenses | 600,000 |
| Net Profit | 200,000 |
| Average Inventory | 100,000 |
| Average Accounts Receivable | 120,000 |
| Initial Investment for New Gym | 1,000,000 |
| Initial Investment for Upgrade | 500,000 |
| Projected Annual Cash Flow (Gym) | 200,000 |
| Projected Annual Cash Flow (Upgrade) | 120,000 |
| Discount Rate | 10% |
| Useful Life (years) | 5 |
Calculate the payback period and net present value (NPV) for both investment options (new gym location and upgrade).
Using the provided data, analyze RapidFit’s inventory turnover ratio and evaluate its operational efficiency.
Explain the impact of inefficiencies in receivables management on RapidFit’s liquidity and suggest strategies to address this issue.
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 goods sold | 960,000 | 1,200,000 |
| Operating expenses | 520,000 | 540,000 |
| Net profit | 320,000 | –200,000 |
Calculate the total adverse variance in costs and the revenue variance for NutraBeam Ltd. in Q2 2024.
Show all your working.
Comment on what these figures suggest about the financial impact of the production crisis.
Explain one weakness in NutraBeam’s production planning that may have contributed to the severity of the disruption.
Suggest one way NutraBeam could adapt its MIS to improve production resilience in the future.
Analyse how budgeting can support better decision-making during and after a crisis.
Alpha Robotics – Optimizing HR and Operations for Growth
| 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% |
| Location | Labor Costs per Hour ($) | Setup Costs ($M) | Expected Efficiency Gains |
|---|---|---|---|
| India | 12 | 30 | 10% increase |
| Singapore | 22 | 50 | 18% increase |
Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.
Explain two operational challenges Alpha Robotics faces in improving production efficiency.
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.
FreshStart Organic
FreshStart Organic is a small business specializing in locally sourced organic produce. Established in 2018, the business prides itself on sustainability and community engagement. FreshStart Organic supplies its products to local markets and runs a subscription box service for home delivery.
Recently, FreshStart has seen increased competition from larger retailers entering the organic market. To remain competitive, the company is considering two options: (1) launching a new marketing campaign to raise awareness of its unique value, or (2) expanding its subscription box service to neighboring towns. However, these strategies require significant investment.
Below is selected financial data for the year ending December 31, 2023:
| Financial Metric | Value (USD) |
|---|---|
| Revenue | 200,000 |
| Cost of Goods Sold (COGS) | 80,000 |
| Operating Expenses | 90,000 |
| Net Profit | 30,000 |
| Total Assets | 150,000 |
| Total Liabilities | 50,000 |
| Current Assets | 60,000 |
| Current Liabilities | 40,000 |
Calculate the Return on Capital Employed (ROCE) for FreshStart Organic using the provided data. Show your workings.
Using the data provided, calculate the Acid Test Ratio for FreshStart Organic and comment on its short-term liquidity position.
Analyze the potential impact of launching a new marketing campaign on FreshStart Organic’s profitability and competitive position.
Explain whether expanding the subscription box service is a better strategic option than launching a marketing campaign.
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 goods sold | 960,000 | 1,200,000 |
| Operating expenses | 520,000 | 540,000 |
| Net profit | 320,000 | –200,000 |
Calculate the total adverse variance in costs and the revenue variance for NutraBeam Ltd. in Q2 2024.
Show all your working.
Comment on what these figures suggest about the financial impact of the production crisis.
Suggest one way NutraBeam could adapt its MIS to improve production resilience in the future.
Analyse how budgeting can support better decision-making during and after a crisis.
Practice 5.6 Production planning (HL only) 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.
EcoForge Ltd. is a UK-based company that manufactures energy-efficient building materials. To improve competitiveness, EcoForge has adopted a lean production strategy, including just-in-time (JIT) inventory systems and total quality management (TQM) initiatives. As part of its production planning review, the company is investing in new software to better align production schedules with customer orders.
EcoForge Ltd. plans to expand into the European market by opening a new manufacturing plant. The finance team has compiled key efficiency and financial data for 2024 to evaluate whether the company should fund this expansion internally or seek external sources of finance.
Table 1: Selected Financial Data – EcoForge Ltd. (2024)
| Item | Amount (£) |
|---|---|
| Revenue | 7,500,000 |
| Cost of goods sold | 4,400,000 |
| Operating expenses | 2,600,000 |
| Net profit | 500,000 |
| Average stock | 550,000 |
Explain one way total quality management (TQM) can support lean production at EcoForge Ltd.
Calculate the stock turnover ratio for EcoForge Ltd.
Show all your working.
Comment on what the stock turnover ratio result suggests about EcoForge Ltd.’s operational efficiency.
Suggest one internal and one external source of finance EcoForge Ltd. could use to fund the new plant.
Analyse how improved production planning could support EcoForge Ltd.’s financial and strategic goals.
NexaHealth Equipment Ltd.
NexaHealth manufactures advanced diagnostic scanners for hospitals. Each scanner requires 72 imported components sourced using a just-in-time (JIT) model. NexaHealth spends £7.2 million annually on R&D, equal to 12% of its £60 million annual revenue, to maintain its innovation lead.
Last quarter, a global semiconductor shortage caused a six-week production delay, resulting in:
To manage this risk, the COO has proposed switching to a just-in-case (JIC) model for critical components, which would increase annual inventory holding costs by £1.5 million but reduce delay risk to below 1%. The operations team instead suggests investing £4.2 million in automation and adopting lean production and TQM practices to reduce dependency on external suppliers.
Identify the stock control method currently used by NexaHealth.
Explain how NexaHealth’s proposed JIC-based contingency plan could affect the business in terms of cost and risk.
Analyse how NexaHealth’s proposed conflict resolution and recruitment strategies could help reduce labour turnover.
Using the stimulus and your knowledge of business management, evaluate which strategy NexaHealth should prioritise to improve operational resilience and long-term competitiveness.
TerraVolt Ltd.
TerraVolt Ltd. is a European company specialising in the production of modular battery storage systems for renewable energy projects. After identifying an opportunity to expand into off-grid African markets, TerraVolt invested heavily in a new research and development (R&D) project to develop a lightweight, durable battery model.
However, unexpected production delays caused by supply chain disruptions forced TerraVolt to activate parts of its contingency plan, including outsourcing key components at higher costs. The finance team has prepared the company's final accounts and depreciation schedules to assess the financial impact and to plan for future investment needs.
Table 1: Statement of Profit or Loss for TerraVolt Ltd. for the year ending 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Sales revenue | 10,200 |
| Cost of sales | 6,300 |
| Gross profit | 3,900 |
| Operating expenses | 2,400 |
| Depreciation expense | 400 |
| Interest | 150 |
| Profit before tax | — |
| Tax | 150 |
| Profit for the year | — |
Table 2: Statement of Financial Position for TerraVolt Ltd. as at 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Non-current assets (at cost) | 2,000 |
| Accumulated depreciation | (800) |
| Current assets | 1,100 |
| Current liabilities | 750 |
| Long-term borrowings | 600 |
| Share capital | 700 |
| Retained earnings | — |
Additional information:
Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.
Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.
Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.
Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.
Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.
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.
ZenMoto Ltd.
ZenMoto Ltd. is a Japanese company that manufactures electric scooters designed for city commuting. To improve operational efficiency, ZenMoto has implemented lean production techniques such as just-in-time (JIT) inventory management, kaizen (continuous improvement), and quality circles across its factories. It is also reviewing its production planning processes to better match seasonal demand fluctuations.
The company plans to expand into new Southeast Asian markets and needs funding for a new manufacturing plant. The finance department has provided key efficiency data and is evaluating whether internal cash flows are sufficient or if external sources of finance are needed.
Table 1: Selected Financial Data – ZenMoto Ltd. (2024)
| Item | Amount (¥) |
|---|---|
| Revenue | 8,500,000,000 |
| Cost of goods sold | 5,200,000,000 |
| Operating expenses | 2,700,000,000 |
| Net profit | 600,000,000 |
| Capital employed | 5,000,000,000 |
Explain one way lean production techniques could improve ZenMoto Ltd.'s operational efficiency.
Calculate the return on capital employed (ROCE) for ZenMoto Ltd. Show all your working.
Comment on how ZenMoto Ltd.’s ROCE result might influence its decision to use internal or external finance for expansion.
Suggest one internal and one external source of finance ZenMoto Ltd. could consider for the new manufacturing plant.
Suggest how improvements in production planning could contribute to better financial performance at ZenMoto Ltd.
RapidFit Gym
RapidFit Gym is a small chain of fitness centers offering affordable memberships and group classes. The company has seen consistent growth over the past five years but is now facing increased competition from boutique fitness studios and online fitness platforms.
RapidFit is considering investing in a new gym location or upgrading its existing facilities to attract more members. The management is also concerned about operational inefficiencies, particularly with inventory management for gym equipment and receivables from corporate clients who pay for bulk memberships.
The following financial data is provided for the year ending December 31, 2023:
| Financial Metric | Value (USD) |
|---|---|
| Revenue | 2,000,000 |
| Cost of Goods Sold (COGS) | 1,200,000 |
| Operating Expenses | 600,000 |
| Net Profit | 200,000 |
| Average Inventory | 100,000 |
| Average Accounts Receivable | 120,000 |
| Initial Investment for New Gym | 1,000,000 |
| Initial Investment for Upgrade | 500,000 |
| Projected Annual Cash Flow (Gym) | 200,000 |
| Projected Annual Cash Flow (Upgrade) | 120,000 |
| Discount Rate | 10% |
| Useful Life (years) | 5 |
Calculate the payback period and net present value (NPV) for both investment options (new gym location and upgrade).
Using the provided data, analyze RapidFit’s inventory turnover ratio and evaluate its operational efficiency.
Explain the impact of inefficiencies in receivables management on RapidFit’s liquidity and suggest strategies to address this issue.
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 goods sold | 960,000 | 1,200,000 |
| Operating expenses | 520,000 | 540,000 |
| Net profit | 320,000 | –200,000 |
Calculate the total adverse variance in costs and the revenue variance for NutraBeam Ltd. in Q2 2024.
Show all your working.
Comment on what these figures suggest about the financial impact of the production crisis.
Explain one weakness in NutraBeam’s production planning that may have contributed to the severity of the disruption.
Suggest one way NutraBeam could adapt its MIS to improve production resilience in the future.
Analyse how budgeting can support better decision-making during and after a crisis.
Alpha Robotics – Optimizing HR and Operations for Growth
| 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% |
| Location | Labor Costs per Hour ($) | Setup Costs ($M) | Expected Efficiency Gains |
|---|---|---|---|
| India | 12 | 30 | 10% increase |
| Singapore | 22 | 50 | 18% increase |
Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.
Explain two operational challenges Alpha Robotics faces in improving production efficiency.
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.
FreshStart Organic
FreshStart Organic is a small business specializing in locally sourced organic produce. Established in 2018, the business prides itself on sustainability and community engagement. FreshStart Organic supplies its products to local markets and runs a subscription box service for home delivery.
Recently, FreshStart has seen increased competition from larger retailers entering the organic market. To remain competitive, the company is considering two options: (1) launching a new marketing campaign to raise awareness of its unique value, or (2) expanding its subscription box service to neighboring towns. However, these strategies require significant investment.
Below is selected financial data for the year ending December 31, 2023:
| Financial Metric | Value (USD) |
|---|---|
| Revenue | 200,000 |
| Cost of Goods Sold (COGS) | 80,000 |
| Operating Expenses | 90,000 |
| Net Profit | 30,000 |
| Total Assets | 150,000 |
| Total Liabilities | 50,000 |
| Current Assets | 60,000 |
| Current Liabilities | 40,000 |
Calculate the Return on Capital Employed (ROCE) for FreshStart Organic using the provided data. Show your workings.
Using the data provided, calculate the Acid Test Ratio for FreshStart Organic and comment on its short-term liquidity position.
Analyze the potential impact of launching a new marketing campaign on FreshStart Organic’s profitability and competitive position.
Explain whether expanding the subscription box service is a better strategic option than launching a marketing campaign.
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 goods sold | 960,000 | 1,200,000 |
| Operating expenses | 520,000 | 540,000 |
| Net profit | 320,000 | –200,000 |
Calculate the total adverse variance in costs and the revenue variance for NutraBeam Ltd. in Q2 2024.
Show all your working.
Comment on what these figures suggest about the financial impact of the production crisis.
Suggest one way NutraBeam could adapt its MIS to improve production resilience in the future.
Analyse how budgeting can support better decision-making during and after a crisis.