Practice 3.3 Costs and revenues 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 3
LuminaCare
Resource 1 – Company profile and financial context
LuminaCare is a Ghana-based, for-profit social enterprise that manufactures solar-powered medical devices for rural clinics and maternal health centers across Sub-Saharan Africa. Its flagship product is a solar fetal heart monitor, which allows midwives to detect complications during pregnancy without relying on grid electricity. The company raised seed capital from impact investors but has now reached an inflection point: demand has grown by 300%, and LuminaCare must decide whether to pursue a $2.5M Series A equity round or take on $1.2M in concessional debt from a development bank.
Resource 2 – CFO’s internal memo (Finance)
“Our burn rate is steady, but we’ve reached our credit limit with suppliers. We operate on 90-day payment terms with clinics, so cash flow is always tight. Series A equity gives us the scale to meet demand and build a second facility—but would dilute founder control and introduce board-level oversight. The concessional loan is low-interest and non-dilutive but comes with covenants: quarterly EBITDA targets, strict capex limits, and donor-style reporting. Any miss could trigger loan restructuring or early repayment.”
Resource 3 – HR performance dashboard (Q1–Q2 2025)
| Metric | Value |
|---|---|
| Staff turnover (last 6 months) | 22% |
| Time to fill technical roles | 49 days (↑ 24%) |
| % of roles with formal job descriptions | 58% |
| Managerial span of control | Avg. 12 direct reports |
| Avg. team engagement score | 67/100 (↓ from 78) |
| The head of HR notes that burnout and unclear career paths are leading to attrition, especially among product engineers and field deployment staff. |
Resource 4 – Marketing team proposal
“Clinics love our mission—but most have no idea who we are until we show up at trade shows. We need to invest in inbound marketing, including a multilingual website, CRM tools, and a referral rewards program for midwives. More crucially, we’re perceived as a donor-funded nonprofit, not a serious tech company. To attract hospital procurement officers and larger buyers, we must reposition the brand to emphasize product quality, not just affordability and ethics.”
Resource 5 – Email thread: CEO to CFO and Marketing Lead
Resource 6 – Feedback from key field partners
“We rely on LuminaCare’s devices, but their response time for repairs has worsened.” “Sometimes we get different pricing from different reps. There’s no standard process.” “I love the mission—but our procurement officer wants a brand that feels serious. A logo change isn’t enough.”
1.[2]
With reference to Resource 3, describe one HR issue that may be impacting LuminaCare’s ability to scale sustainably.
2.[6]
Explain one financial challenge and one marketing challenge LuminaCare may face if it accepts the concessional loan.
3.[17]
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for LuminaCare over the next five years.
Question 2
HLPaper 2
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:
- The initial investment in machinery was €2,000,000.
- Machinery has an expected useful life of 5 years and a residual value of €0.
1.[2]
Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.
2.[2]
Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.
3.[2]
Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.
4.[2]
Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.
5.[2]
Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.
Question 3
SLPaper 2
BeanBar Ltd.
BeanBar Ltd. is a medium-sized company that sells gourmet coffee beans online and in retail stores. The business recently launched a new premium coffee blend and carried out primary market research to better understand customer preferences before the launch. The findings helped inform the company’s updated marketing plan, which included promotional discounts and revised packaging.
Although initial sales were strong, the marketing manager is concerned that poor internal communication between the finance and sales teams may be affecting financial performance. The finance team has noted rising costs, while the operations team wants to reinvest in product development.
Table 1 shows selected financial data for the past two months.
Table 1: Selected financial data for BeanBar Ltd. for 2024
| Item | Month 1 ($) | Month 2 ($) |
|---|---|---|
| Revenue | 100,000 | 90,000 |
| Cost of goods sold | 40,000 | 42,000 |
| Expenses | 30,000 | 35,000 |
| Net profit | ? | ? |
| Current assets | 60,000 | 50,000 |
| Current liabilities | 30,000 | 40,000 |
1.[2]
Calculate the net profit for Month 1 and Month 2. Show all your working.
2.[2]
Calculate the current ratio for Month 2. Show all your working.
3.[2]
Explain one reason why a fall in net profit might concern the finance team.
4.[2]
Identify one method of primary market research used by businesses like BeanBar Ltd.
5.[2]
Outline one problem that may arise from poor internal communication between departments.
Question 4
SLPaper 2
SoundBeam Ltd.
SoundBeam Ltd. is a fast-growing audio technology company that manufactures wireless speakers. The company recently restructured its internal operations by shifting from a flat to a tall organizational structure. This change was made to improve management oversight as the number of employees increased.
The CEO, who is known for her autocratic leadership style, believes that centralized decision-making is necessary to maintain control during expansion. To finance the development of a new product line, SoundBeam Ltd. used both a bank loan and retained profit.
The finance department has compiled the following figures from the most recent quarter.
Table 1: Financial data for SoundBeam Ltd.
| Item | Amount ($) |
|---|---|
| Revenue | 600,000 |
| Cost of goods sold | 320,000 |
| Expenses | 200,000 |
| Net profit | ? |
1.[2]
Identify two features of a tall organizational structure.
2.[2]
Calculate the net profit for the quarter. Show all your working.
3.[2]
Explain one reason why a business might change from a flat to a tall structure as it grows.
4.[2]
Explain one reason why understanding costs and revenues is important for financial planning.
Question 5
HLPaper 3
Elevate Health Tech (EHT)
Resource 1 – Background of the organization
Elevate Health Tech (EHT) is a social enterprise based in Peru. Founded in 2021 by two biomedical engineers, it develops low-cost, portable diagnostic devices (such as digital stethoscopes and glucose meters) for use in rural and underserved communities across Latin America. EHT reinvests all profits into R&D and local employment programs.
EHT has grown quickly, scaling from 5 to 38 employees in two years. It operates as a private limited company, with both founders holding equal ownership and decision-making authority.
Resource 2 – Statement from the HR Director
"Our team is motivated by our mission, but we’re facing growing pains. We’ve recently hired 12 new staff, many with limited technical background. We have no formal training programme or organizational structure. Employees report confusion about job roles, and productivity varies significantly across teams. The co-founders are very hands-on, but this is becoming unsustainable."
Resource 3 – Loan proposal from the Development Impact Bank (DIB)
DIB is prepared to offer EHT a $750,000 low-interest loan to expand production and distribution across four Andean countries. The loan would cover machinery upgrades and recruitment but requires EHT to submit quarterly financial statements and maintain a current ratio of at least 1.5 throughout the term.
A grace period of 18 months will apply before repayments begin.
Resource 4 – Excerpt from EHT’s financial summary (unaudited, 2024)
Note: Fixed assets are fully depreciated and no longer productive.
| Item | Amount (USD) |
|---|---|
| Current assets | $230,000 |
| Current liabilities | $180,000 |
| Non-current liabilities | $50,000 |
| Retained profit | $40,000 |
| Total equity | $100,000 |
Resource 5 – Email from the Head of R&D
"To remain competitive, we need to launch two new diagnostic products within the next 18 months. The current design lab is at capacity. We either need to lease a second lab or invest in automation. The team is overworked and we’ve lost two engineers to burnout. I’m also concerned about our lack of appraisal or performance review systems."
Resource 6 – Mission statement (from company website)
We believe affordable diagnostics are a human right. We exist to empower healthcare workers and communities with reliable tools, local jobs, and dignity-driven innovation.
1.[2]
With reference to the stimulus, describe one internal issue that might arise from EHT’s current ownership structure.
2.[6]
Explain one human resource challenge and one financial challenge that EHT may face if it accepts the DIB loan and scales up
3.[17]
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for EHT over the next five years.
Question 6
HLPaper 3
GreenTech Innovations
Resource 1 - Company Overview
GreenTech Innovations is a renewable energy firm founded in 2018, focusing on developing and deploying solar and wind energy solutions for both residential and commercial clients. With a mission to combat climate change and promote sustainable energy consumption, the company has seen significant growth due to increasing demand for green technologies.
CEO Rachel Thompson emphasizes, "Our goal is to make renewable energy accessible and affordable for everyone, but we face challenges in maintaining profitability while expanding our operations." Despite positive market reception, rising operational costs and competition in the renewable energy sector are pressing issues for GreenTech.
Resource 2 - Financial Performance Report (2023)
GreenTech Innovations
Financial Performance Summary for 2023
| Metric | Amount |
|---|---|
| Revenue | £5,000,000 |
| Gross Profit | £2,000,000 |
| Operating Expenses | £1,200,000 |
| Net Profit | £800,000 |
| Total Assets | £3,500,000 |
| Total Liabilities | £1,500,000 |
| Equity | £2,000,000 |
The company's revenue has increased by 25% from the previous year, but operating expenses have also risen due to investments in new technology and increased staffing costs, raising concerns about long-term profitability.
Resource 3 - Letter from the CFO
Subject: Financial Strategy Update
Dear Rachel,
As we analyze our current financials, it’s essential to develop strategies that balance our growth with profitability.
Here are my suggestions:
Streamline Operations: Assess areas where we can reduce costs without compromising service quality.
Explore New Markets: Consider expanding into regions with lower competition for renewable energy.
Invest in Technology: Leverage automation to enhance operational efficiency and reduce labor costs.
Looking forward to discussing this at our next meeting.
Best,
John Miller, CFO
Resource 4 - Interview with the CEO
In an interview with Eco Business News, CEO Rachel Thompson discussed GreenTech's vision and challenges. "The renewable energy sector is rapidly evolving, and while we are excited about our growth, we must remain vigilant about our operational efficiency.
Our commitment to sustainability and customer satisfaction drives our decisions, but profitability is critical for our long-term success. We're considering partnerships with other tech firms to innovate further."
Resource 5 - Social Media Announcement
1.[2]
Using an appropriate business management theory, identify a human need that GreenTech Innovations products satisfy for their target consumers.
2.[6]
Outline two challenges GreenTech Innovations faces in maintaining profitability. Support your answer with evidence from the resources.
3.[17]
Based on the resources and your business knowledge, recommend a comprehensive strategy to enhance GreenTech Innovations profitability and sustainability over the next five years. Your strategy should consider cost management, market expansion, technological innovations, and consumer engagement initiatives.
Question 7
HLPaper 2
EcoTech Solutions (ETS)
EcoTech Solutions (ETS) is a company that specializes in manufacturing eco-friendly home appliances. They have recently launched a new line of solar-powered refrigerators. The management at ETS is focused on analyzing the financial performance of this new product line to make strategic decisions for future investments. The following financial data is available for the new product line:
Table 1: Financial Information for ETS's Solar-Powered Refrigerators
| Description | Amount ($) |
|---|---|
| Fixed Costs | 400,000 |
| Variable Cost per Unit | 35 |
| Selling Price per Unit | 80 |
| Units Sold | 30,000 |
1.[2]
Calculate the total variable costs and total costs for ETS's solar-powered refrigerators based on the information provided.
2.[2]
Determine the break-even point in units for ETS's solar-powered refrigerators.
3.[2]
Analyze the impact on profitability if the variable cost per unit is decreased to $30 while all other factors remain constant.
4.[2]
Identify two potential strategies ETS could implement to further reduce costs without compromising product quality.
Question 8
SLPaper 2
GreenWorld Landscaping (GWL)
GreenWorld Landscaping (GWL) is a company that provides gardening and landscaping services. The business incurs various costs, including employee wages, equipment maintenance, and rental fees for its storage facility. Additionally, GWL generates revenue through multiple services, such as lawn care, tree trimming, and garden design.
1.[4]
Explain the importance of understanding different revenue streams, such as service fees and add-on sales, for a business like GreenWorld Landscaping.
Question 9
HLPaper 2
FreshBlend Ltd (FB)
FreshBlend Ltd (FB) is a beverage company based in Canada specializing in health-focused smoothies and juices. FB currently operates multiple café locations domestically but is considering expanding internationally into the UK and Japan, recognizing significant opportunities in international marketing.
FB generates revenues primarily through direct café sales. Management is exploring additional revenue streams, such as franchising, online orders, and wholesale distribution.
The company recently invested heavily in a new production facility. Although profitability is strong, FB is facing liquidity issues, highlighting the complex relationship between investment, profit, and cash flow.
FB encountered a public relations crisis after a contamination scare affected one product line, emphasizing the importance of effective crisis management. Management has identified internal communication and contingency planning as key factors affecting crisis response effectiveness.
FB uses break-even analysis to determine product pricing and profitability targets. However, management recently expressed concerns about the accuracy and practicality of current break-even models.
1.[2]
Define the term ‘revenue streams’.
2.[4]
Explain the relationship between investment, profit, and cash flow at FB.
3.[4]
Explain two opportunities that international marketing presents for FB.
4.[4]
Explain two factors that could influence the effectiveness of FB’s crisis management.
5.[10]
Recommend two ways FB could improve its marketing planning using break-even analysis to support international expansion.
Question 10
HLPaper 2
Workspace Essentials (WE)
Workspace Essentials is a family-owned private limited company that has been running three retail office supply stores in a small city for 40 years. The company provides a broad selection of office products, including computer paper, stationery, computers, and printers. Each store was initially established through the purchase of buildings financed with long-term loans. WE aims to generate sufficient profit to support its working capital needs and distribute annual dividends. However, the company lacks a defined marketing strategy.
Traditionally, WE faced competition from several other local office supply stores, but the market was not highly competitive, and customers generally shopped at the closest store. WE's pricing was similar to that of other local retailers, and the company did minimal promotion. On a national scale, the retail office supply industry is in decline, with many stores closing and new competitors entering the market. These new competitors often benefit from factors such as specialization in specific office products, economies of scale allowing for lower prices, and enhanced convenience through e-commerce and home delivery.
Like other brick-and-mortar retailers, WE has experienced a drop in sales, with both gross and net profit margins decreasing. Last year, to ensure sufficient funds for capital and operating expenses, the board of directors decided not to pay dividends. WE expects to need additional financing in the coming year and is considering adjustments to its marketing mix to better compete with new market entrants.
1.[2]
State two marketing objectives that companies like WE might have.
2.[4]
With reference to WE, explain one advantage and one disadvantage of operating as a private limited company.
3.[4]
With reference to WE, explain the difference between capital expenditure and revenue expenditure.
4.[10]
Discuss possible changes to any two elements of WE's marketing mix.