3.3 Costs and revenues questions for IB Business Management

Te Ara E-Bikes

[1] Te Ara E-Bikes (TAE) is a sole trader business in Queenstown, New Zealand, owned by Huia Rangihuna. Huia opened TAE in 2019 with 30 electric bikes (e-bikes) after working for ten years as a mountain-bike guide. TAE’s customers are mainly international tourists who ride the lakeside and wine-region trails between October and April.

[2] TAE has four revenue streams. Most of its revenue comes from e-bike hire at NZ$95 per day. It also runs guided wine-trail tours, repairs and services bikes for local riders, and sells its used e-bikes at the end of each season. Huia leases a shop on the waterfront, insures the fleet and employs one full-time mechanic, Callum, on an annual salary. Tour guides are paid NZ$140 for each tour they lead, and the electricity used to charge the batteries rises with the number of hires.

[3] Between May and September, the winter ski season, TAE’s revenue falls by about 70 %. The shop lease, insurance and Callum’s salary must still be paid, and in 2025 TAE made a loss in four of the five winter months. Huia has used her personal savings to pay suppliers twice.

[4] Huia is considering a new revenue stream: hiring out ski and snowboard equipment from the shop during winter. Queenstown has several large ski-hire businesses close to the ski fields, but none on the waterfront. Callum says he could learn to service skis, and the shop has enough space. The equipment would cost NZ$85 000, which Huia would need to borrow. Her accountant, Annie Zhou, thinks Huia should instead offer winter discounts to local riders and keep the business “doing what it does best”.

Hollis Brickworks

Hollis Brickworks (Hollis) is a public limited company that makes clay bricks at a single site in Leicestershire, England. Its kilns run 24 hours a day. Over the past ten years Hollis has expanded the site three times, adding larger kilns and automated cutting machines. Table 1 shows the company’s estimated annual total costs at different levels of output.

Hollis currently produces 40 million bricks a year. A national house builder has offered Hollis a five-year contract that would raise annual output to 50 million bricks. To meet it, Hollis would have to run older back-up kilns, hire agency staff for night shifts and add a fourth layer of supervisors.

Table 1: Estimated annual total costs of Hollis at different levels of output

Sunaai Hearing Private Limited (SH)

Dr Ritu Awasthi, an audiologist, founded Sunaai Hearing (SH) in Lucknow, India, in 2020. SH is a private sector social enterprise. It designs low-cost rechargeable hearing aids, which are assembled in its own workshop and sold for ₹6 000, compared with ₹40 000 or more for imported models. Its vans visit villages to test people’s hearing free of charge. Ritu owns 55 % of the shares, and an impact investor, Navya Impact Fund, owns 45 %. SH reinvests its profits.

Read the resources and answer the questions that follow.

Resource 1: Extract from a newspaper article

A national health survey estimates that about one in four people over 60 has hearing loss that affects daily life, yet fewer than one in ten of those who need a hearing aid has one. Cost is the main barrier, but stigma matters too: many older people see hearing aids as a sign of weakness. Children with untreated hearing loss often fall behind at school. Most rural districts have no audiologist at all.

Resource 2: SH’s results, 2022–2025

Resource 3: Email from Karan Mehta, SH’s finance manager, to Ritu Awasthi

Each hearing aid costs us about ₹3 900 to make, so we earn ₹2 100 per unit at our normal price. Profit fell in 2025 because we added two new vans and the price of batteries rose. Navya Impact Fund has asked when we will make a profit of at least 10 % of revenue. They suggested we launch a premium model for private clinics in cities at about ₹15 000 to subsidize the village programme.

Resource 4: Social media posts about SH

“My father can hear his grandchildren again. Best ₹6 000 we ever spent.” (Sunil, Sitapur)

“Our hearing aid stopped charging. The nearest SH service point is in Lucknow, 140 km away. We have waited six weeks for a repair.” (Meena, Bahraich)

“Cheap imported hearing aids are sold online for ₹2 500. Why pay more?” (comment under an SH advertisement)

Resource 5: Letter from the state government’s health department

The department invites SH to supply 50 000 hearing aids to public hospitals over three years at ₹4 500 per unit, with payment 120 days after delivery. Suppliers must hold a recognized quality certificate and provide a repair service in every district of the state.

Stolarnia Wierzba is a furniture workshop in Kraków, Poland, that makes solid oak dining tables and upholstered chairs. Its costs include oak timber, fabric for the chair seats, the wages of upholsterers who work only on chairs, the salary of the workshop manager, the rent of a showroom in the city centre and the cost of running the company website.

With reference to Stolarnia Wierzba, distinguish between direct costs and indirect costs.

Pinewood Print is a commercial printer in Halifax, Canada. It prints product catalogues for retailers. For an order of 20 000 catalogues on its existing press, the fixed costs of setting up the job are CAD 18 000 and the variable cost is CAD 0.60 per catalogue.

Pinewood Print has bought a large high-speed press. For a new order of 60 000 catalogues on the new press, the fixed costs of the job are CAD 30 000 and the variable cost falls to CAD 0.45 per catalogue because the press wastes less paper and ink.

Nkabom Savings Ltd (NS)

Read the resources and answer the questions that follow.

Nkabom Savings Ltd (NS) is a for-profit social enterprise in Kumasi, Ghana, founded in 2016 by Akosua Boateng, a former bank manager. It modernizes susu, a traditional savings system in which a collector visits market traders every day to collect small deposits. NS’s 420 agents visit about 38 000 traders, most of them women, and record each deposit on the NS app. Traders can withdraw their savings at any time and, after six months of saving, can borrow small loans to buy stock. NS’s mission is “a safe place for every cedi”. The agents are self-employed and paid commission. Six regional supervisors manage them, reporting to an operations manager at head office.

Image: a smiling agent in a green NS waistcoat holding a phone up to a market trader seated behind piles of tomatoes and onions; the phone screen shows “Deposit received: GHS 20.00 – thank you, Auntie Ama”.

Resource 1 – News article from the *Ashanti Business Mirror*

Regulator to tighten rules on susu collectors after fraud cases

Ghana’s central bank has proposed new rules for microfinance companies that use susu agents. From 2027 every agent must be registered, trained every year and supervised by a team leader responsible for no more than 20 agents. The proposals follow several cases of collectors disappearing with traders’ money. NS, one of the fastest-growing digital susu companies, says it supports the rules but admits that its own fraud losses have risen.

Table 1: NS key figures

Resource 2 – Social media posts from Ama, a trader at Kejetia market

My old susu man ran away with three months of my money in 2019. NS is different – every cedi I give shows on my phone. Last month I used my NS loan to buy two extra bags of rice. #NkabomNS [1/2]

But last week our agent did not come for nine days and his phone was off. NS paid us back after five weeks, but nobody at the office answers the phone. Who is checking these agents? [2/2]

Resource 3 – Internal email from Kwabena Yeboah, operations manager, to Akosua Boateng

From: Kwabena Yeboah, Operations Manager

To: Akosua Boateng, CEO

Subject: Restructuring our agent network

Each of our six supervisors is responsible for 70 agents. They cannot visit them, let alone check their records. We will not meet the regulator’s rule. I see three options:

Option A – employ all agents on contracts at GHS 1 400 a month (plus 13 % social security) instead of commission, organized in 30 teams under employed team leaders paid GHS 2 500 a month.

Option B – keep agents self-employed on commission, but add 30 employed team leaders (GHS 2 500 a month each), buy GPS-tracked tablets for all agents (GHS 150 000 in total) and rotate agents’ routes every six months.

Option C – move customers to depositing by mobile money themselves and reduce the network to 150 agents, who would then mainly sign up new customers and deal with loans.

CONFIDENTIAL: this email and any attachments are intended only for the named recipients.

Resource 4 – NS’s agent economics, 2025

Resource 5 – Survey of NS customers (600 replies)

Resource 6 – Interview with Yaw Owusu, an NS agent for nine years

“I know 95 traders by name and I know which ones are having a bad month. That is why they trust NS. But I am not an employee – no sick pay, no training since 2019, and I have met my supervisor twice. When an agent steals, everybody looks at all of us. If NS gave me a contract and a team leader I could talk to, I would stay for life. If NS replaces us with an app, the women at the market will go back to the old susu men.”