Practice Unit 5: Operations Management - Production Methods, Production planning and management 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.
NeuroTech Ltd. is a European health technology company that develops wearable brain-monitoring devices for medical research institutions. The firm has invested heavily in research and development (R&D) to remain at the forefront of innovation, allocating nearly 18% of annual revenue toward new product development.
Recently, NeuroTech faced a major crisis after a software malfunction in one of its products caused data losses at several hospitals. Although no patients were harmed, the incident received significant media coverage. The firm initiated its crisis management plan, issuing public statements, recalling affected devices, and offering free replacements. Internally, the board has asked for a review of the company’s contingency planning and operational risk mitigation procedures.
Despite the crisis, NeuroTech is evaluating a new R&D investment in a second-generation neural interface. The project is expected to generate significant returns if successful. The finance department has prepared the following data to assist the board in evaluating its financial health and the viability of the investment.
Table 1: Financial Data – NeuroTech Ltd (2024)
| Item | Amount (€) |
|---|---|
| Revenue | 12,000,000 |
| Cost of goods sold | 6,800,000 |
| Operating expenses | 4,400,000 |
| Net profit | 800,000 |
| Capital employed | 6,000,000 |
| Average stock | 1,200,000 |
| Initial investment (R&D project) | 2,500,000 |
| Net cash inflow (Years 1–4) | 850,000 p.a. |
Explain one way contingency planning may have helped NeuroTech Ltd. manage the product failure crisis.
Calculate the return on capital employed (ROCE)
Show all your working.
Calculate the payback period for the proposed R&D project.
Show all your working.
Analyse how NeuroTech’s current financial efficiency may influence its ability to manage R&D risk.
Suggest one way NeuroTech can ensure its future R&D strategy balances innovation with operational risk management.
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.
With reference to Resource 2, describe one human resource concern that may affect BioBox’s operations performance.
With reference to Resource 2, describe one human resource concern that may affect BioBox’s operations performance.
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.
GlobalTech Manufacturing
GlobalTech Manufacturing produces electronic components for multinational companies. The business is considering expanding its operations by opening a new facility to meet increasing demand. Management has shortlisted two potential locations: (1) a developed country with excellent infrastructure but high labor costs, and (2) a developing country with lower operational costs but limited access to skilled labor and reliable utilities.
GlobalTech also plans to implement a new management information system (MIS) to improve coordination between its existing facilities and the new location. The MIS will streamline operations by integrating production, inventory, and logistics data in real-time.
Management must decide how to balance the operational benefits of the MIS with the strategic considerations of selecting the optimal location.
Outline two factors GlobalTech should consider when selecting the location for its new facility.
Analyze the benefits of implementing a management information system (MIS) for GlobalTech’s operations.
Explain the challenges GlobalTech may face in managing operations if it chooses the developing country as its location.
To what extent should GlobalTech prioritize implementing the MIS over its location decision to ensure operational efficiency and long-term success?
Practice Unit 5: Operations Management - Production Methods, Production planning and management 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.
NeuroTech Ltd. is a European health technology company that develops wearable brain-monitoring devices for medical research institutions. The firm has invested heavily in research and development (R&D) to remain at the forefront of innovation, allocating nearly 18% of annual revenue toward new product development.
Recently, NeuroTech faced a major crisis after a software malfunction in one of its products caused data losses at several hospitals. Although no patients were harmed, the incident received significant media coverage. The firm initiated its crisis management plan, issuing public statements, recalling affected devices, and offering free replacements. Internally, the board has asked for a review of the company’s contingency planning and operational risk mitigation procedures.
Despite the crisis, NeuroTech is evaluating a new R&D investment in a second-generation neural interface. The project is expected to generate significant returns if successful. The finance department has prepared the following data to assist the board in evaluating its financial health and the viability of the investment.
Table 1: Financial Data – NeuroTech Ltd (2024)
| Item | Amount (€) |
|---|---|
| Revenue | 12,000,000 |
| Cost of goods sold | 6,800,000 |
| Operating expenses | 4,400,000 |
| Net profit | 800,000 |
| Capital employed | 6,000,000 |
| Average stock | 1,200,000 |
| Initial investment (R&D project) | 2,500,000 |
| Net cash inflow (Years 1–4) | 850,000 p.a. |
Explain one way contingency planning may have helped NeuroTech Ltd. manage the product failure crisis.
Calculate the return on capital employed (ROCE)
Show all your working.
Calculate the payback period for the proposed R&D project.
Show all your working.
Analyse how NeuroTech’s current financial efficiency may influence its ability to manage R&D risk.
Suggest one way NeuroTech can ensure its future R&D strategy balances innovation with operational risk management.
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.
With reference to Resource 2, describe one human resource concern that may affect BioBox’s operations performance.
With reference to Resource 2, describe one human resource concern that may affect BioBox’s operations performance.
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.
GlobalTech Manufacturing
GlobalTech Manufacturing produces electronic components for multinational companies. The business is considering expanding its operations by opening a new facility to meet increasing demand. Management has shortlisted two potential locations: (1) a developed country with excellent infrastructure but high labor costs, and (2) a developing country with lower operational costs but limited access to skilled labor and reliable utilities.
GlobalTech also plans to implement a new management information system (MIS) to improve coordination between its existing facilities and the new location. The MIS will streamline operations by integrating production, inventory, and logistics data in real-time.
Management must decide how to balance the operational benefits of the MIS with the strategic considerations of selecting the optimal location.
Outline two factors GlobalTech should consider when selecting the location for its new facility.
Analyze the benefits of implementing a management information system (MIS) for GlobalTech’s operations.
Explain the challenges GlobalTech may face in managing operations if it chooses the developing country as its location.
To what extent should GlobalTech prioritize implementing the MIS over its location decision to ensure operational efficiency and long-term success?