| Date | May 2018 | Marks available | 2 | Reference code | 18M.1.SL.TZ0.4 |
| Level | Standard level | Paper | Paper 1 | Time zone | Time zone 0 |
| Command term | Calculate | Question number | 4 | Adapted from | N/A |
Question
It is now mid-2019. Production of solar power systems has been going for over a year. Sales have exceeded forecasts and reached 5000 systems for the year. All profits have been reinvested into developing a portable biomass source of electricity* (PBS) as an alternative to solar power systems.
The PBS technology is now fully developed and tested. Su has data to help her decide whether to go into production. The new production facility will cost $1 million.
The costs and the price of the product once production has begun are estimated in Table 3.
Table 3: Estimated cost and price data for PBS
In a separate development, Doorway Foundation (DF), a multibillion-dollar charity established by the owners of one of the world’s largest IT businesses, has approached Su. The foundation has a major IT initiative to bring IT to schools in Afghanistan, Myanmar and Bangladesh. By forming a joint venture, DF could use AS’s expertise and local knowledge to help solve some of the electricity supply and IT problems in Afghanistan. DF would have majority ownership in the joint venture, provide most of the senior managers, and is likely to expect changes in the way AS operates. AS would have to significantly increase the production of solar power systems and would have to restructure. Some managers may lose influence over decisions. Su is worried that her Afghanistan project (AS) would take second place. However, she sees this as a huge opportunity to make a real change in young people’s lives.
[Source: © International Baccalaureate Organization 2018]
* portable biomass source of electricity: a means of generating electricity using the heat obtained from burning plant material and/or animal waste
Refer to Afghan Sun case study SL/HL P1 May and Nov 2018.
Define two characteristics of a charity.
Refer to Afghan Sun case study SL/HL P1 May and Nov 2018.
Using the information in Table 3, calculate the break-even output for portable biomass sources of electricity (show all your working).
Refer to Afghan Sun case study SL/HL P1 May and Nov 2018.
Comment on the usefulness to AS of break-even analysis.
Refer to Afghan Sun case study SL/HL P1 May and Nov 2018.
Recommend whether AS should enter into a joint venture with DF.
Markscheme
PLEASE NOTE: The term charityis not included in the syllabus for 2024 exams onward. The question could be adapted for use with 1.2.4 Non governmental organizations. There will be no future questions however on charities.
• A charity usually performs useful social/environmental functions.
• Charities usually have a tax advantage.
• Charities usually do not seek to make a profit.
Candidates are not expected to word their answer exactly as above.
Award [1] for each characteristic identified.
= 10 000 PBS
Award [2] for 10 000 units per year.
Award [1] if either no units or no working.
• It gives a minimum target for sales. Is 10 000 PBS per year (OFR) achievable?
• It is useful for “what if”.
• It could help in setting prices.
• It could help in production planning.
• However, is the data realistic?
• Will all units be sold?
Award a maximum of [4] for a theoretical answer.
Refer to Paper 1 markbands for May 2016 forward, available under the "Your tests" tab > supplemental resources.
Factors in favour:
• Fits in with Su’s need to make the world a better place – it offers a real opportunity to save lives.
• A nice fit with DF’s project.
• Increased world profile for AS.
• Opportunities for changes in jobs for employees/managers.
• Opportunity to expand and restructure.
• A form of diversification.
• Further benefits to more communities in Afghanistan.
However:
• Managers would not like the changes – smaller span of control, less empowerment.
• Possible production problems – diseconomies of scale?
• Dangers of growing too quickly.
• Afghan project comes second?
• AS would have to change the way it operates.
Marks should be allocated according to the paper 1 markbands for May 2016 forward, section B.
If discussion is one-sided award a maximum of [5].
Both sides considered, good use of evidence, particularly from section B, but no effective recommendation contrast award a maximum of [8].
For full marks a fully supported recommendation with good use of evidence, particularly from section B.
