5.6 Production planning (HL only) Questionbank

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.

Paper

Level

Question 1

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.

Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.

[2]

Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.

[2]

Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.

[2]

Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.

[2]

Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.

[2]

Question 2

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.”

With reference to business management motivation theory, describe one need that GSS satisfies for rural households requiring solar lighting.

[2]

Explain one human resource challenge and one operations challenge GSS may face if it accepts the DRD expansion contract.

[6]

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.

[17]

Question 3

HLPaper 2

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.

[2]

Calculate the return on capital employed (ROCE) for ZenMoto Ltd. Show all your working.

[2]

Comment on how ZenMoto Ltd.’s ROCE result might influence its decision to use internal or external finance for expansion.

[2]

Suggest one internal and one external source of finance ZenMoto Ltd. could consider for the new manufacturing plant.

[2]

Suggest how improvements in production planning could contribute to better financial performance at ZenMoto Ltd.

[2]

Question 4

HLPaper 2

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).

[4]

Using the provided data, analyze RapidFit’s inventory turnover ratio and evaluate its operational efficiency.

[4]

Explain the impact of inefficiencies in receivables management on RapidFit’s liquidity and suggest strategies to address this issue.

[4]

Question 5

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

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%

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.

Resource 3 – Cost-Benefit Analysis for Production Relocation Alpha Robotics – Cost Analysis for Facility Expansion

Location	Labor Costs per Hour ($)	Setup Costs ($M)	Expected Efficiency Gains
India	12	30	10% increase
Singapore	22	50	18% increase

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.

Using an appropriate business management theory, describe an HR challenge that Alpha Robotics is facing.

[2]

Explain two operational challenges Alpha Robotics faces in improving production efficiency.

[6]

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.

[17]

Question 6

SLPaper 2

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.

[3]

Using the data provided, calculate the Acid Test Ratio for FreshStart Organic and comment on its short-term liquidity position.

[4]

Analyze the potential impact of launching a new marketing campaign on FreshStart Organic’s profitability and competitive position.

[4]

Explain whether expanding the subscription box service is a better strategic option than launching a marketing campaign.

[6]

Question 7

HLPaper 2

Prep Chef (PC)

Prep Chef (PC) produces froze ready-made meals that are organic and sold to food retailers around the country.

PC buys large quantities of organic ingredients from local farmers for its just-in-case (JIC) stock control management, using a cost-plus (mark-up) pricing strategy.

PC is known for its:

good-quality organic frozen meals, which are perceived as good value for money
flexibility with retailers in terms of quantity of meals supplied, credit given and efficient delivery at pre-arranged dates
corporate social responsibility (CSR) based on a long-term commitment made to farmers to purchase large quantities of organic ingredients every four months and pay a fair price promptly
PC has an excellent working relationship with farmers, who always prioritize PC’s requests in terms of quantity and delivery.

Recently, an economic downturn and increased competition, especially from non-organic frozen meal suppliers, has decreased demand for frozen organic meals.

The finance manager of PC, Connie, provided the following financial information.

Table 1: Selected financial information for PC

	$\mathbf{2 0 2 2}$	$\mathbf{2 0 2 3}$
Total revenue	$6000000	$3500000
Gross profit margin	$16 \%$	$14 \%$
Net profit margin	$6 \%$	$3 \%$
Creditor days	10	5
Debtor days	50	70
Stock turnover days	20	40
Current ratio	2.1	2.4
Acid test (quick) ratio	0.8	0.6

Connie is worried about the cash flow of PC and suggested the company changes the stock control method from just-in-case (JIC) to just-in-time (JIT). She is also looking at other strategies to improve PC’s financial position.

Define the term corporate social responsibility (CSR).

[2]

Explain one advantage and one disadvantage for PC of using a cost-plus (mark-up) pricing strategy.

[4]

Explain one advantage and one disadvantage for PC of changing its stock control method from just-in-case (JIC) to just-in-time (JIT).

[4]

With reference to Table 1, evaluate two strategies that PC could use to improve its financial position other than transitioning to a just-in-time (JIT) stock control method.

[10]

Question 8

HLPaper 3

Resource 1 – News Article EcoCharge Solutions (ECS) revolutionizes sustainable energy storage! EcoCharge Solutions (ECS), a privately owned social enterprise, specializes in affordable, sustainable power banks made from recycled materials. The company’s mission is “to provide sustainable energy solutions to reduce electronic waste and bridge the energy gap in rural areas.” ECS has developed an innovative buy-one-give-one model: for every solar-powered power bank purchased, a second one is donated to a rural community where access to electricity is unreliable. ECS started as a student-run initiative at a university in 2019. In four years, it has grown into a medium-sized business with manufacturing facilities in Vietnam and Kenya. Table 1: ECS’s Key Operational Challenges

Challenge	Details
Production Bottlenecks	Increasing delays in assembly and quality checks
Supply Chain Issues	Limited access to sustainable materials due to rising costs
Logistics Constraints	High shipping costs and customs delays affecting donations

Resource 2 – Social Media Post from an Employee 💬 Anonymous Employee on LinkedIn: "I love ECS’s mission, but our production process is falling apart! We’re constantly running out of recycled materials, causing delays. Some donated power banks are reaching communities late or not at all. Management needs to fix this before we lose our credibility!"

Resource 3 – Internal Email from ECS CEO 📩 Subject: Scaling ECS Operations Dear Team, We are growing rapidly, but our supply chain and production inefficiencies are threatening our ability to meet demand. I propose two options: (1) Automating part of our assembly line to reduce bottlenecks. (2) Forming a joint venture with a large electronics manufacturer. Both options have risks. Automation is expensive, and a joint venture might compromise our social enterprise values. We need a decision soon. Best, CEO, EcoCharge Solutions

Using an appropriate business management theory, describe a human need that ECS meets through its business model.

[2]

Explain two possible challenges ECS faces in balancing its ethical objectives with its operational growth.

[6]

Using all the resources provided and your knowledge of business management, recommend a possible plan of action to ensure the sustainability of ECS for the next five years.

[17]

Question 9

HLPaper 3

AeroTech Drones – Scaling Production While Maintaining Financial Stability

Resource 1 – News Article AeroTech Drones Faces Challenges Scaling Its Production Line AeroTech Drones, a technology start-up specializing in high-performance drones for commercial use, has seen rapid demand growth in the last two years. The company was founded in 2018 as a private limited company, but it is now considering an IPO (initial public offering) to raise additional capital for expansion. Despite strong revenue growth, AeroTech is facing operational bottlenecks and financial pressures. Key Challenges: (1) High production costs due to inefficiencies in manufacturing and inconsistent supplier lead times. (2) Limited cash flow despite strong revenues, causing delays in R&D investments for next-generation drones. (3) Difficulty in deciding whether to expand the current factory or relocate to a larger facility to accommodate increasing orders. The CEO, Jake Mitchell, is considering three key strategies: (1) Raising capital through an IPO or alternative external funding sources. (2) Optimizing production efficiency through lean production techniques to reduce costs. (3) Expanding into a new location with greater production capacity while balancing cost and operational feasibility.

Resource 2 – Financial Report Summary AeroTech Drones – Financial Data (Last Fiscal Year)

Financial Indicator	Value
Revenue	$200 million
Gross Profit Margin	40%
Net Profit Margin	8%
Current Ratio	0.9
Gearing Ratio	62%

Key Insights: (1) The low current ratio (0.9) suggests short-term liquidity risks, meaning the company may struggle to meet immediate obligations. (2) The high gearing ratio (62%) indicates heavy reliance on debt financing, increasing financial risk if interest rates rise. (3) Profit margins remain solid, but production inefficiencies are increasing costs, reducing overall profitability.

Resource 3 – Break-even Analysis for Factory Expansion

Option	Fixed Costs ($M)	Variable Cost per Unit ($)	Selling Price per Unit ($)	Break-even Output (Units)
Expand Current Facility	20M	200	400	100,000
Relocate to New Facility	35M	180	400	116,667

Key Takeaways: (1) Expanding the current factory has lower fixed costs, but it may not support long-term growth. (2) A new facility reduces variable costs, but has higher fixed costs and a higher break-even point.

Using an appropriate business management theory, describe a financial challenge AeroTech Drones is facing.

[2]

Explain two operational challenges AeroTech Drones faces in scaling its production efficiently.

[6]

Using all the resources provided and your knowledge of business management, recommend a possible plan of action to ensure AeroTech Drones achieves both financial stability and operational efficiency.

[17]

Question 10

HLPaper 2

VR-Furniture Ltd (VRF)

VR-Furniture Ltd (VRF) is a Norwegian company manufacturing sustainable furniture. Recently, VRF acquired a mass-market furniture manufacturer based in Vietnam to expand production and enter larger international markets. This acquisition caused significant cultural clashes between the management teams of Norway and Vietnam, and increased barriers to communication across the merged organization.

VRF traditionally focused on a small, premium niche market, emphasizing high-quality, sustainable designs, including cradle-to-cradle production methods. However, after acquiring the Vietnamese business, VRF must decide whether to maintain its niche market approach or shift towards a broader mass market strategy.

To enhance customer experience, VRF recently introduced virtual reality (VR) showrooms, allowing customers to visualize products at home. However, integration difficulties emerged due to operational differences between the high-tech Norwegian headquarters and more traditional production methods in Vietnam.

Management is also reviewing internal productivity metrics to evaluate the effectiveness of the current operations methods, particularly job production versus mass production.

Distinguish between a niche market and a mass market.

[2]

Explain two potential barriers to communication resulting from VRF’s international acquisition.

[4]

Explain two reasons why cultural clashes might negatively impact VRF’s performance.

[4]

Explain two advantages of VRF using cradle-to-cradle design principles.

[4]

Recommend whether VRF should adopt mass production or continue with job production to optimize productivity, given its recent acquisition and market strategy.

[10]

Global Solar Solutions (GSS)