Essay on Gg Toys Case St

2258 WordsMar 8, 201110 Pages
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 last month's operating results with Audrey Hausner, G.G.'s conkoller, and David Morehouse, G.G.'s manufacturing manager. The meeting was taking place in an atmosphere tinged with apprehension because margins on thelr most popular product, the "Geoffrey…show more content…
While it had planned for production of 24,900 units, only 24,000 units were produced. However, overall revenue during (seeExhibit 1), which exceededforecastedrevenue of $765,000.Although huppy March was $785,000 with the overperformance, plant management did not know how to explain these conflicting results. Springfield Assembly Plant Cradles were assembledin the company's small Springfield assembly plant. The plant produced only one model of the cradle and purchased all of the product's finished components from several local manufacturers. The cradles were assembled from these finished components completely by hand. Cradles contained several components ranging from the cradle bed and rocking cradle legs to a small speaker that played preset music. To ensure the quality of the finished components coming from G.G.'s multiple suppliers, assembly line workers tested the components frequently during the assemblyprocess. Current Costs System system charged each unit of product for direct material and direct labor. G.G.'s cost accor.rnting Material cost was based on the prices paid for raw materials under annual purchasing agreements. Labor rates, including fringe benefits, were $15 per hour and were charged to product based on the standard rurr times for each product (see Exhibit 3). Overhead costs in the Chicago plant were allocatedto Geoffrey dolls and specialty-brandeddolls as a percentageof production-run

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