...normal distribution theory, we discover that as the ordered quantity increases the probability of stockout decreases. At 15,000 the probability of stockout will be 0.8365 At 18,000 the probability of stockout will be 0.6517 At 24,000 the probability of stockout will be 0.2177 At 28,000 the probability of stockout will be 0.0582 3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units and best case in which sales = 30,000 units: Order Quantity: 15,000 were cost price is $16, selling price $24 & after holiday selling price $5 |Unit Sales |Profit | |10,000 |25,000 | |20,000 |120,000 | |30,000 |120,000 | Order Quantity: 18,000 were cost price is $16, selling price $24 & after holiday selling price $5 |Unit Sales |Profit | |10,000 |-8,000 | |20,000 |144,000 | |30,000... [continues] Read full essay Cite This Essay APA (2011, 09). Case Study Specialty Toys. StudyMode.com. Retrieved 09, 2011, from...
Words: 385 - Pages: 2
...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
...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
...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
...Case Study 1: Specialty Toys | Group 10 | Amy GarlitzAlison MalzahnRudy RodelasAngad SinghAbigail Webber | Question 1 The data of the sales of the Weather Teddy presented in the Specialty Toys case has a normal probability distribution. The company has a 95% probability of demand for the Weather Teddy being between 10,000 and 30,000 units. Therefore, 95% of the data is within two standard deviations of the mean. The standard deviation is 5,000, or the data deviates from the mean by 5,000 units. The graph below presents this probability distribution for the sales demand of the new product based on the sales forecast. Question 2 The managers of Specialty Toys had identified the suggested order quantities of 15,000, 18,000, 24,000 and 28,000 as noted on Chart A. The order quantities 10,000, 20,000 and 26,000 are included as further analysis for purposes of answering question 5. The out of stock probabilities for each possible order quantity are determined by converting the data to the standard normal random variable or z-score. The z-score is a function of the mean and standard deviation as noted in the formula z = (x-μ)/σ. The second column of Chart A calculates the numerator of the equation and the third column calculates the z-score. Once the z-scores have been calculated, the probabilities are determined by using the standard normal probability table. With an order quantity of 15,000 the z-value probability from the table is .1587 or rounded to .159. This...
Words: 2071 - Pages: 9
...CASE #4: 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? G.G. Toys should change its existing cost accounting system from traditional costing to activity-based costing (ABC) in the Chicago plant as it is allocating its entire manufacturing overhead on the basis of just one cost driver: production run direct labor cost. Since overhead at the Chicago plant is high, accurate cost accounting system is required. Different types of dolls require different amounts of machine hours, setups, production runs, shipments, etc. By using ABC, different manufacturing overhead would be allocated to each type of doll, giving result to different contribution margins. The current costing system is good for Springfield plant as it manufactures just one product: cradles. 2. Calculate the cost of a Geoffrey doll, the specialty-branded doll #106, and a cradle using the cost study conclusions. Actual unit cost for Geoffrey doll = $15.21 Actual unit cost for specialty-branded doll #106 = $35.10 Actual unit cost for cradle = $23.72 (no change) (Calculations for these cost is shown on the next page) 3. Compare and contrast the profitability of each doll under the new and old systems. Based on your recomputed product costs, what actions would you recommend the company consider to enhance its profitability? What additional information would you like to have to make these recommendations? Under old system...
Words: 317 - Pages: 2
...Specialty Toys, Inc. WEATHER TEDDY Case study: Specialty Toys, Inc. aims to identify the best order quantity of its new product “Weather Teddy” to meet with the demand of the market for this kind of products. The Management department sort out different propositions of quantities to order from the Taiwanese manufacturer. The aim of this case study is to perform statistical studies on the propositions of the Management department in order to perform a recommendation for the best quantity to order associated with the best profit projections. PROCEDURE: FIRST: As indicated in the memo of the Management department, we need to use the sales forecaster’s prediction de approximate the demand distribution. We assume “X” to be the demand of the new toy. X follows a normal distribution with a mean “µ=20,000” and a standard deviation “σ” (unknown). As stated before, Specialty’s senior sales forecaster predicted an expected demand of 20,000 unites with a 95% probability percentage that demand would be between 10,000 and 30,000 units: P(10,000≤X≤30,000) = 0.95 We know that the Z-score formula is: z=(X-μ)/σ so the probability can be written as follows: P((10000-μ)/σ ≤ (X-μ)/σ ≤ (30000-μ)/σ ) = 0.95 P((10000-20000)/σ ≤ Z ≤ (30000-20000)/σ) = 0.95 From tables of areas under the standard normal curve with a 95% prediction score: (30000-20000)/σ = 1.96 σ = (30000-20000)/1.96 =10000/1.96 = 5102 So the demand “X” follows a ND with a mean “µ=20,000” and a standard...
Words: 791 - Pages: 4
...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
...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 Cradle Old System Profit Margin ($) 9% 34% 21% Activity Based Profit Margin ($) 27% 4% 21% Based on the attached...
Words: 466 - Pages: 2
...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 (at least with...
Words: 427 - 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
...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 (at least...
Words: 430 - Pages: 2
...Relevant Facts Toys “R” Us first told the public about their decision to enter the Japanese toy market in 1989. A lot of critics worried that Toys “R” Us would not be successful in this new and foreign market. They raised several issues that they believed proved the Japanese market was not ready for the marketing and retailing strategy that Toys “R” Us offered. They stated that the Japanese culture and beliefs were too different from that of the United States and Europe for Toys “R” Us to be successful. Toys “R” Us incorporates a “category killer” strategy (Johansson 181). In this marketing strategy they use mass advertising in order to make brand recognition, which in turn helps consumers remember and want to shop at their store. They also discount some of the popular items at certain times which give the consumer the impression that everything at their store is inexpensive or discounted. Some critics said that this strategy would clash with the Japanese consumers, since Toys “R” Us competes on price and the Japanese culture links quality with price. Another concern was that Toys “R” Us Japan would not be able to get ample permission and space to build their large toy stores. Toys “R” Us has a policy that none of their stores can be less than 3,000 square feet. This is a problem when entering the Japanese market because they have laws against big stores and land is so expensive. Also some Japanese toy manufacturers said that they would not sell directly to Toys “R” Us, but...
Words: 3523 - Pages: 15
...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
...Case study Toys “R” Us JAPAN Case study Toys “R” Us JAPAN TABLE OF CONTENTS Introduction 3. Japan Background and facts: 4. Background: 4 Facts: 5 Toys “R” Us Background 7. The Beginning: 7 Market Expansion 8 More ways to shop Toys “R” Us 8 Evolving business 9 Toys “R” Us in Japan 9 Case analysis: 10 Attractive factors of Japan toy market: 10 Barriers to Entry: 10 Success Factors for Toy's "R" Us-Japan 11 TRU Strategy 13 Our opinion: 14 Recommendations: 15 Conclusion: 16 References:: 16 Introduction: Toys R Us is the large distributor in the US and it is one of the more successful foreign retailers in Japan after overcome hard barriers. This successful is a result of right decision-making and strategy in overseas expansion by global retailer’s and gradual changes after entry into foreign markets. Also the strategy in respect of standardization adaption before and after entry has great effect in this successful. Coming lines, shows some factors that attract TRU to join venture in Japan. Then, we will discuss group of barriers that TRU had overcome, and how it’s overcome these barriers. In the end, we will evaluate Toys “R” Us in Japan market. Japan Background and facts: Background: Government: Parliamentary with constitutional monarchy Prime Minister: Shinzō Abe (elected Dec 2012) Capital: Tokyo Population: 127,368,088 Population Growth Rate: -0.077% (2012 est.), World Rank: 198th Birth Rate: 8.39 births/1,000 population...
Words: 3158 - Pages: 13
