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
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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
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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
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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 +
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(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
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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
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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
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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
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Short Cycle | Short Cycle process | Who | Audrey Hausner, G.G.’s controller, David Morehouse, G.G.’s manufacturing manager and Robert 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
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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
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