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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 30 Minutes

100 Marks

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IB BUSINESS MANAGEMENT SL, Paper 2, November, 2002, TZ0, Solved Past Paper

Master the 2002 IB November for Paper 2 Business Management SL with examiner tailored solutions and comments for TZ0

Question 1 [Explained]

The Roger Lewis School of Motoring is a business that provides driving instruction to young individuals, primarily targeting those aged between 17 and 22 years. The business was established by Roger Lewis four years ago, using his personal savings. Now, Roger intends to sell the business and has provided potential buyers with a summary of the relevant financial data. The business model emphasizes that most costs are fixed, suggesting that once these are covered, the business becomes highly profitable. Roger also believes that recent government-announced tax increases on petrol will not significantly affect demand.

The financial data provided includes the purchase of 10 cars at a cost of $10,000 each, with an annual income flow of $2,700 per car, expected to remain stable. Additionally, these cars are typically sold after five years for approximately $2,500 each.

Question 1 [a] [Explanation]

This question asks you to calculate the payback period for a car using the provided financial data. The payback period is the time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment. You need to determine how long it will take for the income generated by each car to cover its initial purchase cost, rounded to the nearest month.

Question 1 [b] [Explanation]

This question requires you to compare and contrast the method of financing a business using personal savings with other alternative methods. Consider factors such as interest costs, control over the business, and ease of organization when discussing different financing options.

Question 1 [c] [i] [Explanation]

This question asks you to distinguish between fixed and variable costs. Fixed costs remain constant regardless of the level of production or sales, while variable costs fluctuate with the level of production or sales.

Question 1 [c] [ii] [Explanation]

This question asks you to evaluate Roger's claim that most of the costs in his business are fixed. Consider the nature of the costs involved and provide a reasoned argument to support or refute his statement.

Question 1 [d] [Explanation]

This question asks you to analyze three additional pieces of information that a potential buyer would need to decide if The Roger Lewis School of Motoring is worth purchasing. Consider factors that would impact the business's value and attractiveness to buyers.