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Transcription of this question: 2.Exploration Toys (ET)Exploration Toys (ET) manufactures educational toys. Dr Berac Lolc set up the business in 2006.ET’s unique selling point (IJSP) is that its toys are not only safe and fun, but also teach childrento explore and solve problems. ET sells directly to consumers online, business-to-customers(B2C), and relies only on word-of-mouth promotion•. ET set its toy prices higher than those of itscompetitors.Table 1: selected data for ET, for 2014.Sales revenueNumber of toys soldFixed costsVariable cost per€300 00012 500€121 800€10By 2014, sales had stopped growing. A marketing consultant told Berac that with onlyword-of-mouth and B2C e-commerce sales, the situation would not improve. She recommendedthat ET restructure its marketing mix to include more promotion, lower prices, and an additionalsales method called “toy parties”. ETwould need to recruit part-time sales associates(representatives) to host the toy parties. At the parties parents could see the toys and childrencould play with them. The sales associates would sell ET’s toys on a commission-only basis.However, if sales grew significantly ET would need to lease a larger factory, which wouldincrease fixed costs. Berac forecasted financial data based on the marketing consultant’srecommendations.Cash sales revenueClosing cash balance atyear-end 2014Fixed assetsFixed costsRaw materialsSales commissionsOther variable costs€352 000€37 000€40 000€180 000€128 000€32 000€32 000(a)(c)(d)Describe ETS current distribution channel and the channel recommended by themarketing consultant.(i)(ii)(iii)Using Table 1 , calculate ETS net profit margin for 2014 (show all your working).Using Table 2, calculate ETS forecasted net profit margin for 2015 (show allyour working).Comment on the change in net profit margin from 2014 (actual) and 2015(forecasted).Using relevant data from Table 2, prepare an annual cash-flow forecast for ET,for 2015.Examine two reasons why ET originally charged higher prices for its toys than thosecharged by its competitors.[2][2][5]

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