...Introduction At Toy World Inc., President Jack McClintock is considering the adoption of a level monthly production plan for the coming year. The manufacturer of children’s plastic toys currently employs a production plan that follows the seasonality of sales. In considering whether to implement a level monthly production schedule, we compared the benefits and costs of both methods in relation to the financial and operational needs of the business. This allowed for an in-depth analysis of the savings allowed by a level monthly production schedule, and the impact of such a system on timing, cash flow and risk. As a toy manufacturer, Mr. McClintock’s company would face unique risks under the proposed system of production. These risks were compared to those accepted under a seasonal production schedule. By completing this analysis, we determined that Toy World Inc. would benefit the most from maintaining a seasonal production system. However, since a level monthly production plan would result in cost savings for the company, we have presented options through which Mr. McClintock can manage the financial implications of this schedule. Benefits of Level Monthly Production Mr. McClintock can expect to see savings of $490,000 in labour costs under this production system. These savings would be reflected in a lower cost of goods sold (70% of sales to 65.1%). A level monthly production plan allows the removal of overtime wage premiums in peak seasons, resulting in savings of $225...
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...TOY WORLD - Seasonal Production This spreadsheet replicates Case Exhibits 1 and 2 under the assumption of zero interest rates. Please complete the cash flow statement below. Then replicate the entire model for level production. Hint: remember that COGS=Beginning Inventory+Labor+Materials-Ending Inventory! INCOME STATEMENT month: 12 1 2 3 4 5 6 7 8 9 10 11 12 Sum Sales 120 140 160 140 140 140 160 1620 1840 2140 2285 1115 10000 Cost of Goods Sold 84 98 112 98 98 98 112 1134 1288 1498 1600 780 7000 Gross Profit 36 42 48 42 42 42 48 486 552 642 686 334 3000 Cash OpExp (assumed) 190 190 190 190 190 190 190 190 190 190 190 190 2280 Depreciation (assumed) 10 10 10 10 10 10 10 10 10 10 10 10 120 Total Operating Expenses (from case) 200 200 200 200 200 200 200 200 200 200 200 200 2400 EBIT -164 -158 -152 -158 -158 -158 -152 286 352 442 486 134 600 Interest Expense 0 0 0 0 0 0 0 0 0 0 0 0 0 Interest Income 0 0 0 0 0 0 0 0 0 0 0 0 0 EBT -164 -158 -152 -158 -158 -158 -152 286 352 442 486 134 600 Taxes -56 -54...
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...Executive summary. In this business case, a shift from seasonal to level monthly production of toys will change the seasonal cycle of Toys World's working capital needs and necessitate new bank credit arrangements. It has to be analyzed the company's performance, forecast fund needs and make a recommendation. The case introduces the pattern of current assets and cash flows in aseasonal company and provide and elementary exercise in the construction of the pro forma financial statements and estimation of fund needs. Toy World has been facing two basic issues, as follows: - The first one is if it has to change to a level monthly production. - The second area of concern is the financial arrangement with the bank. These two points are analyzed in detail here in this paper. Finally, I have suggested some recommendations for the issues that I have mentioned above. In reference to the first issue, it will be profitable for the company to change to level monthly production. In reference to the second issue, Toy World has to get a bigger loan. If the company follow this recommendations, it will obtain a profit of $ 531,000 that represents $180,000 more than with seasonal production Background Toy World, Inc is a manufacturer of plastic toys for children, founded in 1973 by David Dunton. In the past, the company's production schedules had always been highly seasonal, reflecting the seasonality of sales. Jack McClintock, president and part owner of...
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...Finanzas Escuela Politécnica del Litoral Maestría en Administración de Empresas ESPAE Francisco Alemán MAE 32 Tema TOY WORLD INC Integrantes: Daniela Vera Andrea Valencia Evelyn Soria Juan José Peralta Luis Paul Bajaña Christian Cruz 2015 Grupo # 8 Andrea Valencia - Daniela Vera - Evelyn Soria - Luis Bajaña - Juan Peralta - Christian Cruz Finanzas 1. Características del Mercado Toy World Inc. se encuentra en un mercado donde las ventas son estacionales, la manufactura es simple y de sencilla tecnología. Se requiere poca inversión (lo que permite la entrada de competidores) y hay una constante guerra de precios en la industria. 2. Matriz Porter Rivalidad entre Competidores en la Industria Potencial Número de Competidores Competencia en precios Introducción de nuevos productos Amenaza Nuevos Entrantes Barreras de entrada Requisitos de Capital Costos por cambio de proveedor Amenaza Productos Sustitutos Juguetes importados (mano de obra barata) Juguetes copiados por la Competencia Poder Negociador de Proveedores Integración vertical Poder Negociador de Clientes Diferenciación de productos Costo de cambio de proveedor Volumen de compra por cliente Alta Alta Alta Alta Alta Baja Bajo Bajo Alta Alta Alta Media Media Media Baja Bajo Medio 3. Preguntas a. ¿Qué factores podría considerar el señor McClintock para decidir si adopta o no el plan de producción uniforme? El señor McClintock debe analizar las necesidades de financiamiento según el plan de producción uniforme...
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...Toy World, Inc. 1) What factors could Mr. McClintock consider in deciding whether or not to adopt the level production plan? Answer: In evaluating whether his company should switch to the level production plan, McClintock should consider the following factors: 1. Additional financing requirements under level production plan: Switching to the level production plan means that the company will have to buy more inventories during low season months to maintain certain level of production, which will result in a longer inventory shelf time and the company’s cash cycle. The longer cash cycle in turn requires more working capital. McClintock needs to assess how much additional working capital this will entail and whether the current credit limit of $2 million is sufficient to provide coverage or if loan renegotiating with bank is possible. 2. Risk of holding higher level of inventory: There is associated risk with holding higher level of inventory especially if expected sales are not realized. The company can end up with unsold inventory, while having to repay a larger loan and higher inventory holding cost. McClintock needs to evaluate if the potential benefits gained from switching to level production plan will outweigh its risk of higher inventory carrying cost. 3. Firm Value and Opportunity Cost: By switching to the level production plan, the company will have to increase its working capital requirements. Any increase in working capital generates negative...
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...Info on Test 1 - Test 1 has a similar form (true/false, multiple choice and numerical questions using myomlab in CBT) as Quiz 1 and Quiz 2. The test time is 2 hrs. - The topic coverage is similar to Quiz 1 and Quiz 2 (and HW1 and HW2) material. - Test questions are pooled. Each question has at least 4 versions. Topics and percentage of questions: Chapter Numerical Conceptual 1 3 6 2 none 6 3 4 6 4 3 6 5 none 6 Total #: 10 30 = 40 questions Total point: 2 points * 10 = 20 points 30 points = 50 points Percentage point: 40% 60% = 100% - Formula sheet is provided in CBT lab (see on Moodle). - Calculator is NOT provided you need to bring your own calculator (not programmable) The most important steps in preparing for the test: Numerical problems (ONLY Ch 1, 3, and 4): - HW 1 and HW 2 review; Quiz 1 and Quiz 2 review; myomlab "Study Plan"; Examples and Solved Problems in textbook; Practice problems with solutions (Moodle); Discussion Forum on Moodle. Conceptual questions (Ch 1 to 5): - Quiz 1 review; Quiz 2; Sample Quiz 1 and 2; definitions on the textbook margin; summary slides; textbook. These tools are available any time for any times to prepare for the test. Problems 1. Know how to calculate single factor, multifactor and change in productivity. 2. Be able to calculate and compare two productivity’s if a change in either output or input occurs. 3. Be able to identify a network diagram in project...
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...annual savings of around $490,000. The question is, by transitioning to a level production schedule, will Toy World Inc. have enough cash on hand to meet purchasing requirements and pay their employees. Additionally, will a level production schedule result in the need for larger loans to be taken out, and at the end of the year will a level production schedule result in more profit? Methodology: Toy World’s estimates have been accurate in the past with regards to how much they are going to sell and how much they are going to purchase to produce all that they need. Because of this we were able to rework a cash budget (Figure 1) that would tell us how much cash they would theoretically need in order to make level production possible. We were also able to make a new income statement (Figure 2) to see how much more or less the company would make if they were to run a level production system. Analysis: Toy World is a company that has been doing very well and has been profitable for many years, but new management believes that the company could be even more profitable. There are many signs that lead us to believe that this is true. The company can save $490,000 in labor charges by switching to level production. On the other hand those savings are somewhat offset by the $115,000 charge for extra inventory and storage fees. In our workup of the cash budget for Toy World we find that the company starts to have to borrow cash early in the year beginning in March. This is because...
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...Toy World, Inc. is a company that manufactures plastic toys for children. It creates toys of many different areas including toy cars, trucks, construction equipment, rockets, spaceships, animals, rockets, etc. The company as a whole has been doing quite well since it opened in 1990 and has experience profitability since early 1993. Although they have been doing satisfactory, there is always room for improvement. They are currently pondering the idea of switching their scheduling production from seasonal to a more level production. It is believed that by switching it will save the company substantial amount of funds and help reserve its factory equipment. Also, they are and need to find a solution to the current loan agreement they have with their bank to coincide with this new plan. Adopting a policy of level monthly production was the idea of Toy World Inc.’s Production manager, Mr. Hoffman. He has stated multiple issues with the current production schedule and exclaimed projected ideas & results with the new level policy. Current problems arising from the seasonal production schedule include overtime premiums reducing profits, seasonal expansion and contraction of the work force resulted in recruiting difficulties and high training/quality costs, machinery was idle for months at a time and subjected to heavy use, frequent set up changes in the machinery, confusion in scheduling runs, and frequent setup changes that resulted in inefficiencies in assembly and packaging...
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... interests based on Long Term Debt (400,000$ with an amortization of 25,000$ due in June and December) and interests based on the Line of Credit (752,000$ at the beginning, with a monthly maturity) . The first has a fixed annual rate of 95/8%, while the second has a annual rate of 9%. In the calculation of those we divided by 12 to reach the monthly payment. 6) The total of Interest incomes are based on the Cash available to Toy World, Inc.. They are equal to 4% (annualized rate of return) times the average monthly cash balances. To compute the monthly interest incomes we did the arithmetical mean of two months cash availability. Doing this we addressed the lack of knowledge related to the dates of payments. 7) The NIBT is the difference between the Gross Margin plus...
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...Student Name: Shunde Tu Student ID: 000196745 Course: MGT 121( Financial Management II) Case Study on Toy World I. Situation Audit a) Plastic Toys Manufacturing Industry Overview i. Highly seasonal, with a majority of sale volume generated between Aug. and Nov. ii. Competitive landscape 1. Highly competitive, populated by a large number of companies 2. Fierce design and price competition, with short product lives and a relatively high rate of company failures 3. Low entry barrier resulted from low capital and technology requirements. 4. Influx of imported toys intensified competitive pressure on smaller firms. b) Company Overview The company studied in the case is Toy World, a manufacturer of plastic toys for children. More than 80% of the sale was generated between Aug to Nov. Toy World Inc.’s practice was to produce in response to customer orders. Therefore, the production was highly seasonal, and not more than 25%-30% of manufacturing capacity was used for the first seven months. c) Product Overview i. Produce a wide range of designs, colors and sizes for most of its product categories. ii. Dollar sales of a particular product had sometimes varied by 30%-35% from one year to the next. II. Problem Statement The company’s production had been scheduled to accommodate the seasonality of sales. The production manager proposed to adopt level production to reduce labor costs. The feasibility...
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...TOY WORLD INC, CASE Issues * To change Toy World´s production processes, from seasonal to even monthly production, * cThe arrangement of getting the loan for the bank and how it will be secured by the account receivable and inventory * Toy World is facing several challenges related to its equipment usage and availability, leading to high overhead costs under Seasonal production Inputs * Expected sales for 1994 is $1000000 * 200000 is the minimum cash balance * A loan of $752000 was outstanding at the end of 93, the bank is willing to extand the credit line up to $2million, it will be secured by the account receivable and inventory * Collecting period of account receivables is 60 days * Under the seasonal production cost of goods sold would be 70% of sales , under the level production cost of good sold would be 65.1% of sales . * Under the level production storage and handling cost will increase by $115000, it will be included in operating expenses. Solution Production Cost | | Inventorized production | | balance of enventore at the end of month | | | | | | | | | | 586 | 542.5 | | $464.38 | | $1,050.38 | 542.5 | | $451.36 | | $1,501.74 | 542.5 | | $438.34 | | $1,940.08 | 542.5 | | $451.36 | | $2,391.44 | 542.5 | | $451.36 | | $2,842.80 | 542.5 | | $451.36 | | $3,294.16 | 542.5 | | $438.34 | | $3,732.50 | 542.5 | | -$512.12 | | $3,220.38 | 542.5 |...
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...The toy industry has been a thriving industry around the globe for a very long time. Manufacturers of toys have invested billions of dollars to come up with new ideas, that fits the expectations of everchanging preferences of children who are the main consumers of the products. Today in the post-fordest era of capitalism and globalization, this industry effects so many people from different areas of the world. After studying the commodity chain of toys with geographer’s perspective this paper will conclude how, despite being a multi-billion-dollar industry (World Toy Market, 2007-2016), the current commodity chain of toys is inefficient benefiting only the executives that dwells in modernized/developed countries like USA at the expense of the...
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...GROUP 7 GROUP 7 TOY INDUSTRY SUBJECT: SMSP TOY INDUSTRY SUBJECT: SMSP DHARAM JOSHI VISHAL NARULA POOJA SAMPAT VINEET HARDA CHIRAG SHAH KUNAL PAREKH DHARAM JOSHI VISHAL NARULA POOJA SAMPAT VINEET HARDA CHIRAG SHAH KUNAL PAREKH GROUP MEMBERS GROUP MEMBERS India’s market potential The Indian toy industry is estimated at about 1.4 billion US dollars and until now has generated only 0.5 per cent of the global market. However, growth of some 15 % promises a rapid rise in this statistic, especially in the context of the growing middle class and increasing demand for quality and luxury goods. In recent years, cities like Ahmedabad, Bangalore, Hyderabad and Pune have become the most important manufacturing sites of the Indian toy industry. Among the local manufacturers in India about 59 % are still focusing on the production of cheap and unbranded toys which appeals to the price-sensitive Indian consumers. In the future it is expected that these companies will shift towards branded toys as well to stay competitive with international companies. Internet retailing is becoming a more and more important distribution channel due to several reasons. Consumers have increasing access to the internet and online retailers often have better merchandise in terms of variety, new launches and the offer of branded toys. The share of internet retailing in sales grew from 1 % in 2007 up to 18 % in 2012. Focus on quality Indian consumers pay more and more attention to high-quality...
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...Industrial Promotion and Technology Branch TECHNOLOGY PAPER SERIES 6/05 Technology Transfer and Trade: The Toy Industry in India UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION I N D U S T R I A L P R O M OT I O N A N D T EC H N O LO GY B R A N C H Technology Transfer and Trade: The Toy Industry in India TECHNOLOGY PAPER SERIES TPS 6/05 December 2005 UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Vienna, 2005 UNIDO Industrial Promotion and Technology Branch Technology Paper Series TPS No. 6/2005 December 2005 Technology Transfer & Trade in Toy Industry of India Copyright © 2004 by United Nations Industrial Development Organization (UNIDO) The designati ons employed and the presentation of the material in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The responsibility for options expressed rests solely with the authors, and publication does not constitute an endorsement by UNIDO of the opinions expressed. This document has been produced without formal editing. The views expressed in this report do not necessarily reflect the views of the Secretariat of the United Nations Industrial Development Organization. Any indication of, or reference to, a country, institution...
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...Sellers 4 May 2015 Socialization of Gender Toys R Us has been around for many years. When you go online you will notice that the boys section have action-oriented categories and the girls section has homemaking, beauty and imaginary categories. The baby section is the only one that is not separated by gender. According to the text book Gender is defined as “ psychological, social and cultural aspect of maleness and femaleness”. According to the textbook, “girl toys revolve around themes of domestic, fashion and motherhood.” while “boy toys, are emphasize action and adventure and encourage exploration, competition and aggression”. The four toys that I chose for boys are: Hot wheels, Minecraft, LEGO Train set and Home Depot Deluxe Power Tool Set. The toys that I chose for the girls are: My Little Pony Twilight Sparkle, Barbie, LEGO Friends Dolphin Cruiser and the Wooden Kitchen Center. The Hot wheels cars are different in size and have multiple colors, which are usually dark colors such as black, blue, green etc. The cars can teaches boys how to identify cars and grow up to like them as the boys grow up. Minecraft started out as a videogame that became popular where toys created for boys to play with. The package comes with Steve, Pig, Chestnut Horse, Saddle, two Grass Blocks and two Hay Blocks. The toys mimic the game where boys pretend to be Steve, who is the main character of the game and goes out to the virtual world and builds thing like a house and a farm. It...
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