These are explanations and solutions for IB past papers, not the official version. For official papers, you can go to IB Follet or access them through your school.
These are explanations and solutions for IB past papers, not the official version. For official papers, you can go to IB Follet or access them through your school.
These are explanations and solutions for IB past papers, not the official version. For official papers, you can go to IB Follet or access them through your school.
These are explanations and solutions for IB past papers, not the official version. For official papers, you can go to IB Follet or access them through your school.
01 Hours 45 Minutes
60 Marks
Calculator is allowed
IB BUSINESS MANAGEMENT SL, Paper 2, November, 2015, TZ0, Solved Past Paper
Master the 2015 IB November for Paper 2 Business Management SL with examiner tailored solutions and comments for TZ0
Question 1 [Explained]
Evana Dox has recently established a business named Calorie Count (CC), targeting local middle-aged individuals who struggle to maintain a healthy lifestyle due to long working hours. Customers will order meals in the morning, and Evana will deliver them in the evening. She is converting the ground floor of her house into a professional kitchen that meets all hygiene and food safety regulations. Her niece Athena, a catering college graduate, will be employed to assist her. Evana will finance 60% of the initial investment and start-up costs from her personal savings, with the remaining 40% sourced externally.
Evana's secondary market research indicates that similar-sized catering businesses have a net profit margin of 35%. However, she anticipates a lower net profit margin for her new business. Her goal for the first year is a net profit margin of 15%. She aims to sell an average of 50 meals per day, 5 days a week, at an average price of $17 per meal. This price is intended to be competitive and provide an adequate contribution per meal for business success. CC uses a cost-based pricing strategy with estimated costs as follows:
- Variable cost per meal: 70% of the selling price
- Fixed cost per annum: $42,000
Question 1 [a] [Explanation]
This question asks you to identify two variable costs for CC. Variable costs are expenses that change in direct proportion to the level of output or sales. In the context of a catering business, these costs fluctuate based on the number of meals prepared and sold.
Question 1 [b] [Explanation]
This question asks you to define the term 'contribution.' Contribution is a key concept in cost accounting and helps in determining the profitability of individual products or services. It represents the portion of sales revenue that exceeds variable costs and is available to cover fixed costs and generate profit.
Question 1 [c] [i] [Explanation]
This question asks you to calculate the break-even level of output for CC. The break-even point is the level of output at which total revenue equals total costs, resulting in neither profit nor loss. It is a critical measure for determining the minimum sales volume required to cover all costs.
Question 1 [c] [ii] [Explanation]
This question asks you to calculate the margin of safety if CC sells 50 meals per day, 260 days per year. The margin of safety is the difference between the actual sales and the break-even sales volume. It indicates the extent to which sales can drop before the business reaches its break-even point.
Question 1 [c] [iii] [Explanation]
This question asks you to calculate the profit or loss if CC sells 50 meals per day, 260 days per year. Profit or loss is determined by subtracting total costs from total revenue. This calculation helps assess the financial performance of the business.