...Gg Toys Case St G.G.Toys Thedecline margins our popular in on Gtoftry doIIproduct become has intolerable. production Increasing haae costs dropped pretaxmarginto less our than10%, below historical our 257omargins, wearegoing If far to increase margins, need consider our we to drastically shiftingour production towards sfecialtydolts aie that earning large prnniumin priceoaer standard line. a our doll -Robert Parker,President, G.G.Toys Background Robert Parker, president of G.G. Toys, was discussing last month's operating results with Audrey Hausner, G.G.'s conkoller, and David Morehouse, G.G.'s manufacturing manager. The meeting was taking place in an atmosphere tinged with apprehension because margins on thelr most popular product, the "Geoffrey doll," had been declining rapidly in the last few years due to rising production costs (summary operating results for the previous month, March 2000, arc shown in Exhibits 1 and 2). Parker saw no choice but to shift the company's product mix towards specialty dolls that carried a high price premium, and thus, a 34% margin. G.G. Toys was a leading supplier of high-quality dolls to retail toy stores throughout the U.S, The comPany had started with a unique design for molding highly durable dolls using vinyl and resin materials. G.G. quickly established a loyal customer base among retailers because of the high quality and popularity of its manufactured dolls. It soon established a major presence in the market with its high-volume...
Words: 329 - Pages: 2
...G.G. Toys 1. Do you recommend that G.G. Toys change its existing cost system in the Chicago Plant? In the Springfield plant? Why or why not? In the Chicago plant, G.G. Toys should change its existing cost accounting system from the legacy or traditional costing methodology to activity-based costing (ABC). In allocating overhead as a percentage of direct labor cost, the margins of 9% and 34% in the Geoffrey doll and the specialty branded doll #106 respectively, do not reflect the actual cost of overhead. Currently G.G. Toys is calculating its manufacturing overhead costs on only on one cost driver, the direct labor. From case facts, we know that the manufacturing overhead at the Chicago plant is very high (approximately 95% of the overall GG Toys manufacturing overhead) The 3 different categories of dolls require different amounts of machine hours and other variable costs. By using Activity-based costing, each specific category of doll would have a different manufacturing overhead (and hence different contribution margin) allocated to it and the profit margin analysis for the doll category would yield an accurate result that can be used successfully for measuring controllability and relevance over long run. For the Springfield plant, GG Toys has approximately 5% of the overall overhead and from case fact, we know that GG purchases finished components from local manufacturers and then assemble the components (to form the cradles) using manual labor and there is no machine hours...
Words: 725 - Pages: 3
...Answer 1 a. We have to make a decision, how much space should we lease and for how long. Constraint is the minimum space required. The objective of this function is to minimize b. Decision Variables: Let Xij = the space leased in month (i) for the period of (j) months, for i = 1, 2, …, 5 and j = 1, …, 6. Objective Function: Minimize Z = 65(X11 + X21 + X31 + X41 + X51) + (100X12 + X22 + X32 + X42) + 135(X13 + X23 + X33) +160(X14 + X24) + 190X15 Constraints: X11 + X12 + X13 + X14 + X15 >= 30,000 Month 1 Req. X12 + X13 + X14 + X15 + X21 + X22 + X23 + X24 >= 20,000 Month 2 Req. X13 + X14 + X15 + X22 + X23 + X24 + X31 + X32 + X33 > = 40,000 Month 3 Req. X14 + X15 + X23 + X24 + X32 + X33 + X41 + X42 >= 10,000 Month 4 Req. X15 + X24 + X33 + X42 + X51 >= 50,000 Month 5 Req. Answer 2: b. Decision Variables: Let F1 = Number of full-time consultants working the morning shift (8 AM – 4 PM) Let F2 = Number of full-time consultants working the evening shift (4 PM – 12AM) Let P1 = Number of part-time consultants working the 1st shift (8 AM – 12 PM) Let P2 = Number of part-time consultants working the 2nd shift (12 PM – 4 PM) Let P3 = Number of part-time consultants working the 3rd shift (4 PM – 8 PM) Let P4 = Number of part-time consultants working the 4th shift (8 PM – 12AM) Objective Function: Minimize Z = 14*8* (F1 + F2 ) + 12*4 * (P1 + P2 + P3 + P4 ) Constraints: Minimum number of consultant requirement F1 + P1 >= 4, F1 +...
Words: 1018 - Pages: 5
...(1) Existing Cost System Recommendations The Chicago plant must switch to the activity-based costing method from their traditional costing method to better represent overhead cost allocation margins of the Geoffrey and #106 doll. Because G.G. Toys is allocating overhead costs as a percentage of direct labor cost in their traditional costing methods, the actual cost of each doll is not accurately reflected. The Chicago plant has a very high manufacturing overhead but is only considering direct labor, which is calculated as a single cost driver in the old costing system. Because each of the three dolls use different amounts of machine hours, as well as variable costs, the activity-based costing model would better reflect the contribution margin, and ultimately, the profit margin. G.G. Toys’ production at the Springfield plant uses a minimal percentage of total overhead manufacturing costs because of the direct labor costs involved in hand-assembly of finished goods. According the case, only one product is produced in Springfield and there are no machine hours used, as shown in Exhibit 1 within the case. Because of this, the activity-based costing method would be unnecessary at the Springfield plant and G.G. should continue to use their old costing system, keeping direct labor as the primary cost driver, to analyze production margins. (2) Calculations with Cost Study Conclusions *See attached spreadsheet, page 4. (3) Compare and Contrast Geoffrey Doll Specialty #106...
Words: 466 - Pages: 2
...G.G. Toys Case Study February 28, 2012 The five most pressing issues G.G. toys is facing are the decline in pre-tax margins of the Geoffrey doll, the costing system being used in the Chicago plant, how to efficiently use the excess materials and machinery used to create the reindeer doll for three months, whether or not to produce the “Romaine Patch” doll and the last being what caused an increase in sales in the Chicago plant in March 2000 despite a decrease in production. The first issue is the continuously declining pre-tax margins of the Geoffrey doll. This margin has dropped from 25% to 10%. This being one of their popular dolls requires the company to consider altering their current production schedule towards dolls that are producing a higher margin. The second is the costing system currently being used in the Chicago plant. G.G. Toys should change its existing cost accounting system from traditional costing to activity-based costing because it is calculating its manufacturing overhead on only one cost, direct labour. Since overhead at the Chicago plant is high, the cost accounting system must be accurate. Different types of dolls require different amounts of machine hours and other variable costs. By using Activity-based costing, each doll would have a different manufacturing overhead allocated to it. This would sort production into categories giving each a unique contribution margin. The third issue to discuss is how to efficiently use the equipment purchased...
Words: 517 - Pages: 3
...To: Audrey Hausner From: Heather Varez HV Subject: G.G. Toys Internal Cost Study and Costing Methods Date: Tuesday, December 09, 2008 The internal cost study has brought up issues of costs related to alternative drivers for the machine related expenses, increased setups, production runs and work in packaging and shipping. Cost System Recommendation I recommend that G.G. Toys institute an Activity Based Costing (ABC) system in their Chicago plant. In allocating overhead as a percentage of direct labor cost, the margins of 9% and 34% in the Geoffrey doll and the specialty branded doll #106 respectively, do not reflect the true cost of manufacturing. When using the ABC system, we see that a tremendous misallocation in “Receiving and Production Control” and in “Packaging and Shipping” occurred using the previous system. These skewed allocations of costs also distorted the margins as shown below. Comparison of Alternative Costing Approaches | | | | | | Unit Overhead Cost | | Geoffrey Doll | | Specialty #106 | Volume-based | | $11.19 | | $13.99 | Activity-based | | 7.22 | | 25.01 | Difference | | $3.97 | | $11.02 | Unit Margin | | | | | Volume-based | | 1.81 | | $12.26 | Activity-based | | 5.78 | | 1.24 | Difference | | $3.97 | | $11.02 | Return on Sales | | | | | Volume-based | | 8.62% | | 34.06% | Activity-based | | 27.51% | | 3.43% | Difference | | 18.89% | | 30.62% | If G.G. can reduce the number...
Words: 919 - Pages: 4
...The Australian National University Research School of Accounting BUSN7050 Corporate Accounting First Semester 2016 TUTORIAL BUSN7050 Corporate Accounting Tutorial Semester 1, 2016 About Tutorials …So you begin by being uncertain as to what the answer is.…The question of doubt and uncertainty is what is necessary to begin; for if you already know the answer there is no need to gather any evidence about it.…[A]nother way and a very important one that should not be neglected and that is very vital is to put together ideas to try to enforce a logical consistency among the various things that you know. It is a very valuable thing to try to connect this, what you know, with that, that you know, and try to find out if they are consistent. And the more activity in the direction of trying to put together ideas of different directions, the better it is. …Now we have found that this is of paramount importance in order to progress. We absolutely must leave room for doubt or there is no progress and there is no learning. There is no learning without having to pose a question. And a question requires doubt. Richard P. Feynman, Nobel Laureate Tutorials serve a variety of purposes. One purpose is to give you an opportunity to improve your understanding by completing the set questions. In addition, tutorial participation encourages the development of problem solving and critical thinking skills as well as oral communication skills and written communication...
Words: 903 - Pages: 4
...Parker, President G.G. Toys. | What | Increase the margins of the Geoffrey Doll. | Why | The decline in margins on the Geoffrey Doll has become intolerable. | When | ASAP. | | | Case Difficulty | Analytische | Conceptuele | Presentatie | Problem ? Yes | Theory? | Structured? Yes, 7 pages | Solution? No | | | | Long Cycle Define the problem The decline of the margin on the Geoffrey Doll has become intolerable. The margin has to stop decreasing and should go up. They need to consider drastically shifting their production towards specialty dolls. Importance / Urgency | Low | High | Low | | Increase the margin on the Geoffrey Doll. | High | | Stop the decrease of the margin on the Geoffrey Doll. | Analyse the case We analysed the information of exhibit 1, 2, 3 and 4. Alternatives * Reduce the manufacturing costs * Produce the Romaine Doll * ABC-method for the Geoffrey Doll * Do nothing Criteria * Costs * Profit * Implementation time Asses the alternatives Alternatives | Decision Criteria | | | | | | Qualitative | | Quantitative | | | | Implementation time | | Costs | Margin | | 1. | | | | | | 2. | | | | | | 3. | | | | | | Select the best alternative We think that Develop an implementation plan | Develop an implemanation plan | Who | Robert Parker, President G.G. Toys. | What | | Where | At the Chicago plant of G.G. Toys. | When | ASAP. | ...
Words: 760 - Pages: 4
...consist in production initially. Then, in its modern Chicago manufacturing facility, the company machine-molded the vinyl and resin into doll bodies and even had varies different styles and designs for the clothing. While using the same equipment and labor, they had to schedule when each of these modern jobs could be completed. I believe that explains why there was less units produced. Today’s new manufacturing environment requires new cost-accounting systems as well as new technology. It’s simple, updating the present system can achieve greater benefits in terms of producing and providing information for decision making in the future. (Updating Standard Cost Systems, Cheatham, C, Quonum Books, 1993). Therefore, I believe that G.G. Toys should change its existing cost accounting system from traditional costing to activity-based costing in the Chicago plant. Activity-based costing also known as ABC is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. This model assigns more indirect costs or overhead into direct costs compared to conventional costing. (Wikipedia.com). With the overhead at the Chicago plant being so big, the cost accounting system being accurate is very important and required. The Chicago plant production is run...
Words: 297 - Pages: 2
...G. G Toys Case Analysis By Managerial Accounting June 16, 2013 Costing systems are components of a broader accounting system used by a given company or organization. Their main function is to keep a focused eye on expenditures made by the company in question. Synthesis of Existing Cost Models to Meet System of System Needs, p.86. G.G. Toy's production process for dolls started with the basic raw materials needed for the bodies of the dolls, wool and things for the hair and clothing and all of these things were consist in production initially. Then, in its modern Chicago manufacturing facility, the company machine-molded the vinyl and resin into doll bodies and even had varies different styles and designs for the clothing. While using the same equipment and labor, they had to schedule when each of these modern jobs could be completed. I believe that explains why there was less units produced. Today’s new manufacturing environment requires new cost-accounting systems as well as new technology. It’s simple, updating the present system can achieve greater benefits in terms of producing and providing information for decision making in the future. (Updating Standard Cost Systems, Cheatham, C, Quonum Books, 1993). Therefore, I believe that G.G. Toys should change its existing cost accounting system from traditional costing to activity-based costing in the Chicago plant. Activity-based costing also known as ABC is a costing methodology that identifies activities...
Words: 1257 - Pages: 6
...1. Estimated cost of a Geoffrey Doll, the specialty-branded doll #106, and a cradle Based on the internal cost study, the costs of Geoffrey Doll and the specialty branded doll #106 changed drastically. There was no change in the costs of the cradle as the Springfield plant is very labor intensive. Below are the calculations for the total cost of each type of doll & the cradle: Cost Breakdown (in $) Geoffrey Doll Specialty Branded Doll #106 Cradles Direct Labor Cost 3.00 3.75 7.50 Direct Material Cost 5.00 6.00 12.00 Total Manufacturing Overhead (details in Appendix) 7.22 25.36 4.22 Total Cost 15.22 35.11 23.72 Revised costs at the Chicago facility are based on Internal Cost Study: • Labor and Material cost remain the same as these are direct costs • Machine Related costs are allocated in the ratio of the machine hours required for the production of each item • Plant management and facilities related costs are calculated using the old methodology and are allocated in the ratio of direct labor cost • Set up labor cost is allocated in the ratio of number of setup hours required to produce each unit • Receiving and production control cost is allocated in the ratio of production/machine runs required to produce each unit as per assumption 3 in the internal cost study • Packaging and shipping costs are allocated in the ratio of number of shipments as per assumption 4 in the internal cost study. 2. Profitability comparison of each doll under the new and old systems ...
Words: 1071 - Pages: 5
...[Writer Name] [Supervisor Name] [Subject] [Date] Fieldwork Paper In my fieldwork project observed a number of gamers who will be divided into 2 categories of addicts and non addicts. People who play for more than 5 hours a day are called addicts and those who play less time than that are called non-addicts. Which will focus on the specific players in a game called World of Warcraft. This game is a very popular game worldwide with over 5000 people playing at any given time (Cronin 113-147). Its popularity is one of the reasons why people are getting addicted to it. Gamers are all the time looking for new and interesting games and as they find something new they started playing and telling their friends and family about it. In this way those people themselves get obsessed of games as well as they make others overwhelmed with the interest of gaming. I would define this group of players as a culture because they have their own way of life that is very different from anything one is, they spend much of their time in gaming which is no more than a way to get busy. And this activity does not mean anything useful. In addition at one point these 5000 players are playing then a sort of a social group of their own. Some of my songs are complete addicts and play this game at least 8 hours a day without worrying about college, sleep or work. These people have no friends and not have any food because they are busy playing Warcraft all day (Mayra 45-113). We think that it will be a great...
Words: 1612 - Pages: 7
...Lego occupies a strong position in the market for construction toys with relatively few rivals one must consider that Lego is now competing in boarder market of children's entertainment which in the lead up to 2004 began in include large incumbents from the electronics sector such as Sega and Nintendo. Power of buys The power of the buyer in the case of Lego may be seen as relatively high with low switching costs between alternative toys and even substitute products such as video games and television. Power of suppliers The power of suppliers may be seen as average, Lego's products on the whole may be seen as largely based upon standardised inputs such as plastics and chemicals. There is the consideration that were Lego chooses to move into non-traditional areas such as sets associated with films or games the power of suppliers will increase as a key input becomes that of licences which is a form of intellectual property. Threat of substitutes This may be seen as the largest threat to the Lego group in the run up to the end of 2004. Although it is difficult to define what market a company occupies (Grant 2008, Porter 2004) for the purpose of considering the impact of substitution one must consider Lego to be a provider of children's entertainment. In this case the threat from substitutes are rather high given that consumers may substitute between alternative traditional toys such as action figures or toy cars through to electronic products such as video games and...
Words: 381 - Pages: 2
...Jennifer Smith G.G. Toys: Case study #2 G.G. Toys was a toy manufacturer facing problems with productivity and profitability. The company found a profitable product in their Geoffrey doll and Specialty branded doll #106. Retailers could customize to the specifications and buying habits of their customer base. On average, the Geoffrey Doll cost $19.19 to produce, and the #106 doll $23.74. To access in a study of their overhead cost for both of their plants, research showed that: 1. A setup was performed in the Chicago facility each time a modification to the dolls was made. Additionally, each time a specialty-branded doll was produced, a separate setup was required to process the raw materials to the required specifications. 2. Workers in the Chicago facility often operated several machines simultaneously once they were set up. Thus, machine-related expenses might relate more to the machine hours of a product than to its production-run labor hours. Because each retailer required slight alterations to the Geoffrey doll's overall appearance, a new setup and production run was required for each design change. Retailers were found to be conservative in their ordering patterns, ordering fewer units more frequently. Thus increasing the number of setups required, causing increased labor and material cost. The research done by the external group did show an area of opportunity. Because setup is time consuming, labor intensive, and costly, it would be within reason...
Words: 429 - Pages: 2
...the notion of others- so if someone pick up his toy, he may throw a tantrum or voice a protest as he sees his object is an extension of his self Age 3 * Child’s brain is almost fully grown * Lying- a developmental milestone! As it demands quite advanced cognitive and social skills * Almost 4- children will lie on a regular basis * Purpose is different: 3- lie to avoid punishment; older child- control a social situation * Awareness of gender identity * Enjoy grown-up role play * Sharing responsibilities: household chores They enjoy learning about their world through role play and imitation * Sense of self has expanded- to include sense of others and this inspired him to share, take turns, empathize, and do cooperative play. It is also an ideal time to establish shared family events such as regular mealtimes * Peer pressure * When it comes to deciding on who is right and who is wrong, 3 year olds will go with the majority. * Age 3 * Play is the dominant feature of preschool life. Preschool phase is said to be the most playful stage of human life. Based on your observations or experiences, what are the toys usually enjoyed by preschool children? * Cooperative play * e.g. invention or copying of a set of rules; can spontaneously change rules * Others: puzzles, board games, card games, drawing and painting * Imaginary friends- invisible presence or a favorite toy that has been enrolled to play the part of the friend...
Words: 524 - Pages: 3
