Supertoys Ltd is the sole manufacturer in Scotland of the Super-robot toy. The current level of production and sales is 40,000 toys per annum. The selling price of each Super- robot is £20. The contribution from each toy is 20 per cent of the selling price. Fixed costs of current operations are £100,000 per annum. A feasibility study based on new methods of working that include making greater use of part-time workers has shown that production and sales could be increased to 60,000 toys per annum. This would increase fixed costs by £20,000 but would reduce variable costs by £4.50 per toy. In order to sell 60,000 toys per annum, the selling price would have to be reduced by £2.50 per toy. The managing director has expressed concern that the new methods of working will leave his company more vulnerable to fluctuations in demand. He has set a target of a 50 per cent increase in profit during the coming year. He is uncertain as to whether implementing the findings of the feasibility study would be compatible with achieving this target. Required: Prepare a report to the managing director of Supertoys Ltd analysing and interpreting the information provided in the feasibility study. Your report should include a response to his concern about the vulnerability of the company if the new methods of working were adopted.