Business management · 2015 · May · Paper 2 · HL · Question paper

M15/3/BUSMT/HP2/ENG/TZ0/XX Business and management Higher level Paper 2 © International Baccalaureate Organization 2015 9 pages Instructions to candidates yy Do not open this examination paper until instructed to do so. yy Section A: answer one question. yy Section B: answer two questions. yy A calculator is required for this examination paper. yy Clean copies of the business and management formulae sheet and discount tables are required for this examination paper. yy The maximum mark for this examination paper is [75 marks]. 2 hours 15 minutes Thursday 21 May 2015 (morning) 2215 – 5012 – 2 – Section A Answer one question from this section. 1. 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 prices slightly higher than the competition. Production and sales are mostly between 1 October and 24 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 1 Sales revenue €300 000 Number of toys sold 12 500 Fixed costs €121 800 Variable cost per toy €10 In 2014, the management of CT considered a change of the marketing mix to include above 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 parents and 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 a commission-only basis. Toy parties could be held throughout the year and make CT’s total sales less seasonal. Based on market research, management has estimated that the parents’ demand for toys is price elastic and is planning to set lower prices for all toys sold online and at toy parties. The management has prepared forecasted financial data for CT, for