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02 Hours 15 Minutes

75 Marks

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IB BUSINESS MANAGEMENT HL, Paper 2, May, 2015, TZ0, Solved Past Paper

Master the 2015 IB May for Paper 2 Business Management HL with examiner tailored solutions and comments for TZ0

Question 1 [Explained]

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.

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 2015, based upon the proposed change to the marketing mix.

The Finance Manager will carry out a variance analysis in order to determine whether the proposed change to the marketing mix has been successful.

Question 1 [a] [Explanation]

This question asks you to identify two possible types of above the line promotion that CT could use. Above the line promotion refers to promotional activities that are aimed at a mass audience and typically involve media such as television, radio, newspapers, and the internet.

Question 1 [b] [Explanation]

This question asks you to define the term variance analysis. Variance analysis is a tool used in management accounting to analyze the difference between actual and budgeted figures, such as costs, revenues, and profits.

Question 1 [c] [Explanation]

This question asks you to explain two possible human resource implications for CT's management given the proposed change to introduce 'toy parties' as an additional sales method. Consider how this change might affect recruitment, training, employee contracts, and potential conflicts within the workforce.

Question 1 [d] [i] [Explanation]

This question asks you to calculate the break-even level of output for CT, for 2014. The break-even point is the level of output at which total revenue equals total costs, resulting in neither profit nor loss.