Gg Toys Case Solution

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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 $) Geoffrey Doll Specialty Branded Doll #106 Cradles Direct Labor Cost 3.00 3.75 7.50 Direct Material Cost 5.00 6.00 12.00 Total Manufacturing Overhead (details in Appendix) 7.22 25.36 4.22 Total Cost 15.22 35.11 23.72 Revised costs at the Chicago facility are based on Internal Cost Study: • Labor and Material cost remain the same…show more content…
Geoffrey Doll Specialty Branded Doll #106 Cradles Standard Unit Cost ($) 15.22 35.11 23.72 Selling Price ($) 21.00 36.00 30.00 Margins (New) 28% 2% 21% Margins (Old) 9% 34% 21% Based on these findings, below are the recommendations GG Toys should consider to enhance profitability (in order of priority): • We observed non-viable cost patterns due to high customization and low unit orders by retailers for specialty branded doll #106, hence the management should look at better sales & marketing strategy to take bulk orders • Try to reduce overall production runs by aggregating different orders, thereby increasing batch size. Marketing strategy of delay in turnaround time is required to achieve this • Move from specialty branded doll #106 to other specialty branded dolls as they have higher margins (see table 2 in appendix) • Revisit the selling price of specialty branded doll #106 based on the customization requirements by the customers. • Optimization of machinery so that production setups are not required for small customizations which can be managed manually. • Decrease machine runtime by adopting newer technology. Additional information needed to be able to make these recommendations: • Direct costs & selling price for other specialty branded dolls. • Market dynamics to understand the change in demand with slight increase in
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