5.5 Break-even analysis questions for IB Business Management

Zagadka Escape Rooms (ZER)

[1] Marta Nowicka and Tomasz Zieliński met while studying engineering in Kraków, Poland. In 2021 they formed a partnership, Zagadka Escape Rooms (ZER), and leased a vaulted cellar in the Kazimierz district. ZER now has three themed rooms in which groups of up to six people have 60 minutes to solve puzzles and “escape”. Marta designs every puzzle herself, using mechanisms, light and sound rather than padlocks, and ZER is rated among the best escape rooms in Poland on travel websites.

[2] ZER’s customers are tourists, groups of friends, and companies that book rooms for team-building. Tomasz manages the bookings, marketing and finances. Two salaried managers run the site, and students are paid by the session to host each game.

[3] ZER charges PLN 240 per booking (one group in one room). The variable cost of each booking, including the host’s pay, props that need replacing and card payment fees, is PLN 40. ZER’s fixed costs are PLN 30 000 a month. In 2025 ZER averaged 210 bookings a month, although bookings in January and February were much lower.

[4] Tomasz wants to open a second site in Wrocław, a city with many students and growing business tourism. Three rival escape-room companies already operate there. A consultant estimated that the Wrocław site would have fixed costs of PLN 36 000 a month and, with the same prices and variable costs, would break even at 180 bookings a month. Her report forecasts 200 to 230 bookings a month, based on the number of bookings at ZER in Kraków.

[5] Marta is unsure. Designing three new rooms would take her about eight months, and she worries that puzzles designed in a hurry would harm ZER’s reputation. She would rather add a fourth room in Kraków, where customers are already turned away on Saturdays. The partners would need a bank loan of PLN 400 000 to open in Wrocław.

Prairie Oat Co.

Prairie Oat Co. (POC) is a private limited company in Saskatoon, Canada, that makes oat drinks from oats grown by local farmers. It plans to launch a new barista-style oat drink in 1-litre cartons for coffee shops and supermarkets across western Canada. The market for plant-based drinks is growing, but it is dominated by two international brands that sell their cartons for about CAD 3.80.

POC’s marketing team has prepared forecasts for two pricing strategies, shown in Table 1. The fixed costs of the new production line are CAD 700 000 a year, and the variable cost is CAD 1.70 per carton under either strategy.

Table 1: Forecasts for the first year of the new oat drink

POC’s factory can produce up to 800 000 cartons a year. Its brand is well known for its local sourcing.

Paso Común (PC)

Read the resources and answer the questions that follow.

Paso Común (PC) is a social enterprise in Medellín, Colombia. It was founded in 2017 by Mariela Ospina, a former social worker, as a non-profit foundation. PC makes canvas shoes with soles cut from recycled tyres in a workshop where former members of armed groups, who have completed the government’s reintegration programme, work side by side with people whose families were victims of the armed conflict. PC’s mission is “to rebuild trust one step at a time”. It sells its shoes in its own shop, online and at craft fairs.

Image: a pair of PC’s canvas shoes in deep green, with a black sole made from a recycled tyre. Two hands, one older and one younger, are tying the laces together. Printed on the shoe box: “Paso Común – two stories, one step”.

Resource 1 – News article from *Medellín Hoy*

The workshop where former enemies make shoes together – but can it grow without losing its soul?

Eight years ago, few people believed that former fighters and conflict victims could share a workbench. Today PC employs 34 people and its shoes are worn by two city councillors and a famous salsa singer. Yet the foundation reported its first deficit in 2025. Donations from international peace-building programmes are falling as donors move their attention to other parts of the world.

Table 1: Selected information for PC, 2022–2025

COP m = millions of Colombian pesos. USD 1 ≈ COP 4 000.

Resource 2 – Social media posts from Yeison, a PC employee

Seven years ago I came down from the mountains with nothing. PC gave me a trade, a salary and people who now call me brother – including Doña Rosa, whose son was killed in the war. That is what these shoes mean. [1/2]

Now there is talk of investors and big shops. We were told PC belongs to all of us. If strangers buy it, will we still have a voice, or will we just be machines that make shoes faster? #PasoComún [2/2]

Resource 3 – Internal email from Mariela Ospina to PC’s board of trustees

From: Mariela Ospina, Director

To: Board of trustees

Subject: The Calzado Andino offer and how we pay for it

Calzado Andino, a national footwear retailer with 140 stores, has offered PC a three-year contract for 2 000 pairs a month. The shoes would be sold under Calzado Andino’s own brand, not ours, and it would pay 60 days after delivery. To meet the order we need a second workshop and new cutting machines costing about COP 960 million.

As a foundation we cannot sell shares, and the bank will only lend the full amount at 14 % a year, secured on our building. Fondo Semilla Andina, an impact investor, would invest COP 700 million for 30 % of the shares if we become an S.A.S. BIC*, and would want one seat on a five-person board. Some staff have asked whether we could become a worker co-operative instead.

Please read the lawyer’s summary (attached) before our meeting on Friday. We must answer Calzado Andino within six weeks.

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

* S.A.S. BIC: a Colombian private limited company that registers a social and environmental purpose and must report every year on its social impact.

Resource 4 – Lawyer’s summary of three legal forms for PC

Resource 5 – Results of a staff survey (30 of 34 employees replied)

Resource 6 – Cost and price information for the Calzado Andino contract

Mopane Wild Honey is a beekeeping co-operative in Zambia’s Western Province. Its 140 members hang hives in mopane woodland and sell the honey through the co-operative, which bottles it and sells it to supermarkets in Lusaka. Before buying a second bottling machine, the co-operative’s treasurer calculated the break-even point for the new machine.

Define the term break-even point.

Taa Yetu Solar

Taa Yetu Solar (TYS) is a private limited company in Kisumu, Kenya. It assembles home solar kits (a panel, a battery, wiring and three lights) for households that are not connected to the electricity grid. TYS sells each kit for KES 18 000 and currently assembles and sells 600 kits per month. Its monthly costs are shown in Table 1.

Table 1: TYS’s monthly costs

Salmonberry Point Lodge (SPL)

Read the resources and answer the questions that follow.

Salmonberry Point Lodge (SPL) is a wilderness lodge on the central coast of British Columbia, Canada. It is owned by the economic development corporation of a First Nation of about 900 members, and run as a social enterprise: its surplus is paid into a Nation fund for language and culture programmes, housing and jobs for young people. Guests fly in by floatplane and stay three to five nights between May and October to watch grizzly bears in a river estuary, visit ancient village sites and learn about the Nation’s history from local guides.

Image: a wooden lodge with a carved and painted entrance post stands at the edge of a misty inlet. In the foreground a guide in a red jacket points across the water at a grizzly bear catching salmon. Caption: “Salmonberry Point – see the coast through our eyes”.

Resource 1 – Newspaper article from *Coastal Business Weekly*

Indigenous-owned lodges show that tourism can pay – and protect

Ten years ago the inlet’s main employer was a logging company. Today the Nation’s lodge employs 37 of its own members, most of them under 30, and young guides are learning the Nation’s language so that they can teach it to visitors. “Every dollar a guest spends stays in our community,” says Lena Hunt, chief executive of the development corporation.

Table 1: Selected information for SPL

Resource 2 – Social media posts from Dana, an SPL guide and Nation member

I grew up hearing that our language would die with my grandmother. This summer I guided guests from 14 countries and told them the names of every river in our language. The lodge paid for my lessons. Proud. [1/2]

But last August there were four boats in the estuary at the same time and the bears left the river for two days. Now people are talking about cruise ships. The bears were here before any of us. #ProtectTheInlet [2/2]

Resource 3 – Internal email from SPL’s general manager to the development corporation’s board

From: Mark Feldman, General Manager

To: Lena Hunt and board members

Subject: Two offers we must decide on

Offer 1: Pacific Meridian Cruises wants to stop at the inlet 36 times a season with about 320 passengers each time. It would pay SPL CAD 110 per passenger for a three-hour visit. We would need a new dock costing CAD 1.6 million; the cruise line would lend us half of this, interest-free, repaid from future fees. The lodge cannot take 320 people to the bears, so visits would be to the village, the big house and a salmon barbecue.

Offer 2: Coastal Timberlands will pay the Nation CAD 250 000 a year for ten years for permission to build a logging road across our territory to a valley next to the estuary. It promises not to log within 2 km of the river.

Both would add a lot of income. Both will be controversial. I need the board’s direction before the cruise line’s deadline at the end of next month.

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

Resource 4 – Extract from a report by a university bear researcher

Grizzly bears feeding in the estuary leave when boats, noise or people come too close. To avoid disturbance, no more than 24 visitors should be at the viewing platform during each tide period, with two periods a day during the 120-day season. Logging roads open forests to hunters and vehicles and have reduced bear numbers in nearby valleys.

Resource 5 – Survey of Nation members (210 replies)

Resource 6 – The general manager’s figures for the cruise offer