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Transcription of this question: Creative Toys (CT)Creative Toys (CT) manufactures toys and markets them business-to-customers (B2C) online only.The business operates in a leased industrial site and relies on word-of-mouth promotion only.To make customers believe that CT’s toys are better than its competitors, CT sets pricesslightly higher than the competition. Production and sales are mostly between 1 October and24 December. Most of the employees work on temporary contracts during this busy period.For the remainder of the year, CT operates well below capacity utilization.Table 1 contains selected data for CT, for 2014:Table 1Sales revenue€300 000Number of toys sold12 500Fixed costs€121 800Variable cost per toy€10In 2014, the management of CT considered a change of the marketing mix to includeabove the line promotion, lower prices, and an additional sales method called “toy parties”.Toy parties would be hosted by newly recruited CT sales representatives and attended by parentsand their children. At the parties parents could see the toys and children could play with them.Sales would be made at the parties by the new sales representatives, who would be paid on acommission-only basis.Toy parties could be held throughout the year and make CTS total sales less seasonal. Basedon market research, management has estimated that the parents’ demand for toys is price elasticand is planning to set lower prices for all toys sold online and at toy parties. The managementhas prepared forecasted financial data for CT, for 2015, based upon the proposed change to themarketing mix, shown in Table 2 below.Table 2Cash sales revenue €352 000Closing cash balance atyear-end 2014Fixed assetsFixed costsRaw materialsSales commissionsOther variable costs€37 000€40 000€180 000€128 000€32 000€32 000The Finance Manager will carry out a variance analysis in order to determine whether theproposed change to the marketing mix has been successful.(Question 1 continued)(a)(b)(c)(d)(f)Identify two possible types of above the line promotion that CT could use.Define the term variance analysis.Explain two possible human resource implications for CTS management giventhe proposed change to introduce “toy parties” as an additional sales method.Using information from Table 1:(i) calculate the break-even level of output for CT, for 2014 (show all yourworking);(ii) construct to scale a fully labelled break-even chart for CT, for 2014.Using information from Table 2, prepare an annual cash-flow forecast for CT,for 2015.Analyse CTS management plan to reduce the price of CTS toys.[2][2][2][5]

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