G.G TOYS.docx | bartleby

G.G. Toys Introduction G.G Toys is one of the renowned manufacturers of high quality, durable dolls which is popular for its distinctive designs in U.S. It has two different manufacturing plant, The Chicago and the Springfield plant. With it’s signature product, “Geoffrey Doll”, the company built a strong foundation in the U.S market. However, due to the rising production cost of Geoffrey Doll, G.G toys were experiencing diminishing margins. To maintain their market stability in the competitive market, they again expanded their line by producing “Specialty dolls” customized by their customers in retail store. With this, they were able to make more revenues by charging higher price, however, time and effort it required was also high for this which increased their cost by the time. Problem Statement What approaches should G.G. Toys take to deal with rising production costs and boost their gross profit margin? Questions Do you recommend that G.G. Toys change its existing cost system in the Chicago plant?

In the Springfield plant? Why or why not? Do you recommend that G.G. Toys change its existing cost system in the Chicago plant? In the Springfield plant? Why or why not? Do you recommend that G.G. Toys change its existing cost

system in the Chicago plant? In the Springfield plant? Why or why not? Do you recommend that G.G. Toys change its existing cost system in the Chicago plant? In the Springfield plant? Why or why not? 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? Computation of OVH cost per unit

OVH cost pool Unit Total Cost (exhibit 1) Capacity (Exhibit 4) Cost/Unit Machine Related Machine hrs 112000 112000 10 Plant Management and Facilities Production Hrs 40000 27000 1.48 Set up Labour Related No. of Production setup 13333 160 83.33 Production order Related No. of Production runs 63000 161 391.3 Packaging & Shipping No. of shipments 53000 350 151.42 Allocation of OVH cost to the Products. OVH costs Geoffrey Doll Specialty Branded Doll Cradles Machine Related 37500 12000 0 Plant Management and Facilities 11250 6000 4500 Set up Labour Related 833 8330 0 Production order Related 3913 39130 391.3 Packaging & Shipping 1514 33308 7570 Total Allocated OVH 55010 98768 12461.30 Unit Produced 7500 4000 3000 Cost of OVH per Unit 7.33 24.692 4.15 Currently, the company use production run direct labor costs to drive the total cost. This is appropriate when there is a single product as like Springfield plant. However, since the Chicago Plant manufacture two different products, Activity Based Costing would be the appropriate costing method for Chicago. This is because each activity would require the different machine

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