Specialty Toys
Specialty Toys, Inc. sells a variety of new and innovative children's toys. Management learned that the preholiday season is the best time to introduce a new toy, because many families use this time to look for new ideas for holiday gifts. When Specialty a new toy with good market potential, it chooses an October market entry date.
In order to get toys into its stores by October, Specialty places one-time orders with its manufactures in June or July of each year. Demand for children's toys be highly volatile. If a new toy catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits be realized. However, toys can also flop, leaving Specialty stuck with high levels of inventory that must sold at reduced prices. The most important question the faces is deciding how many units of a toy should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in sales.
For the coming season, plans to introduce a new product called Weather Teddy. This variation of a talking teddy bear is made by a company in Taiwan. When a child presses Teddy's hand, the bear begins to talk. A built-in barometer selects of five responses that predict the weather conditions. The responses
As with other products, Specialty faces the decision of how many Weather Teddy units to order for the coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, or 28,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning the market potential. The product management team asks you for an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential, and help with making an order quantity recommendation. Specialty expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 per unit. After reviewing the sales history of similar products, Specialty's senior sales forecaster predicted an expected demand of 20,000 units with a .95 probability that demand would be between 10,000 units and 30,000 units
Managerial Report
Prepare a managerial report that addresses the following issues and recommends an order quantity for the Weather Teddy product.
1. Use the sales forecaster' s prediction to describe a
Want to see the full answer?
Check out a sample textbook solutionChapter 6 Solutions
Bundle: Essentials of Modern Business Statistics with Microsoft Office Excel, Loose-leaf Version, 7th + MindTap Business Statistics, 1 term (6 months) Printed Access Card
- The Lawson Fabric Mill Produces five different fabrics. Each fabric can be woven on one or more of the mill’s 36 looms. The sales department’s forecast of demand for the next month is shown in below Table 1, along with data on the selling price per yard, variable cost per yard, and purchase price per yard. The mill operates 24 hours a day and is scheduled for 30 days during the coming month. The mill has two types of looms: draw and regular. The draw looms are more versatile and can be used for all five fabrics. The regular looms can produce only three of the fabrics. The mill has a total of 36 looms: 8 are draw and 28 are regular. The rate of production for each fabric on each type of loom is given in below Table 2. The time required to change over from producing one fabric to another is negligible and does not have to be considered. The Lawson Fabric Mill satisfies all demand with either its own fabric or fabric purchased from another mill. Fabrics that cannot be woven at the…arrow_forwardThe Bennett Distribution Company, a subsidiary of a major home appliance manufacturer, wants to forecast sales for next year. The Atlantic Coast branch, with current sales of $193.8 million, is expected to achieve sales growth of 7.25%; the Midwest branch, with current sales of $79.3 million, is expected to have a increase of 8.20%, and that the Pacific Coast branch, with current sales of $57.5 million, increase its sales 7.15%. What is the predicted average growth rate in sales for the next year? Select one: Or a. The predicted average rate in sales for the next year is 7.46% Or b. The predicted average rate in sales for the next year cannot be calculated due to lack of information O c. The predicted average rate in sales for the next year is 22.6% Or d. The predicted average rate in sales for the next year is 7.53% 6arrow_forwardNew legislation passed in 2017 by the U.S. Congress changed tax laws that affect how many people file their taxes in 2018 and beyond. These tax law changes will likely lead many people to seek tax advice from their accountants (The New York Times). Backen and Hayes LLC is an accounting firm in New York state. The accounting firm believes that it may have to hire additional accountants to assist with the increased demand in tax advice for the upcoming tax season. Backen and Hayes LLC has developed the following probability distribution for a = number of new clients seeking tax advice. Excel File: data05-19.xlsx f(x) 20 0.05 25 0.20 30 0.25 35 0.15 40 0.15 45 0.10 50 0.10 a. Is this a valid probability distribution? - Select your answer - Explain. f(z) Select your answer - - Select your answer b. What is the probability that Backen and Hayes LLC will obtain 40 or more new clients (to 2 decimals)? c. What is the probability that Backen and Hayes LLC will obtain fewer than 35 new clients…arrow_forward
- New legislation passed in 2017 by the U.S. Congress changed tax laws that affect how many people file their taxes in 2018 and beyond. These tax law changes will likely lead many people to seek tax advice from their accountants (The New York Times). Backen and Hayes LLC is an accounting firm in New York state. The accounting firm believes that it may have to hire additional accountants to assist with the increased demand in tax advice for the upcoming tax season. Backen and Hayes LLC has developed the following probability distribution for number of new clients seeking tax advice. x f(x) 20 0.05 25 0.20 30 0.25 35 0.15 40 0.15 45 0.10 50 0.10 b. What is the probability that Backen and Hayes LLC will obtain 40 or more new clients (to 2 decimals c. What is the probability that Backen and Hayes LLC will obtain fewer than 35 new clients (to 2 decimals)? d.Compute the expected value, variance, and standard deviation of (to 2 decimals). Expected value…arrow_forwardNew legislation passed in 2017 by the U.S. Congress changed tax laws that affect how many people file their taxes in 2018 and beyond. These tax law changes will likely lead many people to seek tax advice from their accountants (The New York Times). Backen and Hayes LLC is an accounting firm in New York state. The accounting firm believes that it may have to hire additional accountants to assist with the increased demand in tax advice for the upcoming tax season. Backen and Hayes LLC has developed the following probability distribution for * = number of new clients seeking tax advice. Excel File: data05-19.xlsx f(2) 20 0.05 25 0.20 30 0.25 35 0.15 40 0.15 45 0.10 50 0.10 a. Is this a valid probability distribution? - Select your answer - Explain. f(x) Select your answer - Select your answer - b. What is the probability that Backen and Hayes LLC will obtain 40 or more new clients (to 2 decimals)? c. What is the probability that Backen and Hayes LLC will obtain fewer than 35 new clients…arrow_forwardThe college graduates of 2000 could hardly have asked for better luck. The unemployment rate dropped to 4.1 % in May 2000- roughly, the lowest level in a generation- and employers were literally scrambling for new hires. Starting salaries rose, many graduating seniors had numerous job offers, and some firms even offered $10,000- $20,000 bonuses to students who signed the dotted line. Three years later, the job market for the Class of 2003 was rather different. U.S. economic growth had slowed to a crawl, and then to a halt. Companies that had stocked up on recent college grads in the tighter labour markets of 1998-2000 found themselves with more than they knew what to do with in 2002 and 2003. They were not eager to hire more. Bonuses and other “perks” disappeared; job offers became scarcer. With the unemployment rate around 6% in May and June of 2003, the job market was far from the worst ever. But it was nothing like the glory days of 2000. YOU ARE REQUIRED TO: (iv) Briefly…arrow_forward
- Every month a clothing store conducts an inventory and calculates losses from theft. The store would like to reduce these losses and is considering two methods. The first is to hire a security guard, and the second is to install cameras. To help decide which method to choose, the manager hired a security guard for 6 months. During the next 6-month period, the store installed cameras. The monthly losses were recorded and are listed here. The manager decided that because the cameras were cheaper than the guard, he would install the cameras unless there was enough evidence to infer that the guard was better. What should the manager do? Security guard Cameras 355 284 401 398 477 254 486 303 270 386 411 435arrow_forwardSwain Athletic Gear (SAG) operates six retail outlets in a large Midwest city. One is in the center of the city on Cornwall Street and the others are scattered around the perimeter of the city. Management at SAG is concerned about declining sales and profitability of the Cornwall store and believes that outlet has been a drag on profits in recent years. The most recent income statement for the Cornwall store follows. SWAIN ATHLETIC GEAR Cornwall Street Store Income Statement For the Year Ending February 28 Sales revenue $ 12,300,000 Costs Cost of goods sold $ 5,289,000 Advertising 1,421,000 Store administrative salaries 975,000 Sales commissions 1,056,000 Leases and utilities 2,100,000 Allocated corporate support 1,622,000 Total costs $ 12,463,000 Net loss before tax benefit $ (163,000) Tax benefit at 25% (40,750) Net loss $ (122,250) The CFO at SAG has asked for your advice on closing the Cornwall Street store. If the Cornwall Street store is…arrow_forwardSpecialty Toys, Inc. sells a variety of new and innovate children’s toys. Management learns that the pre-holiday season is the best time to introduce a new toy, because many families use this time to look for new ideas for December holiday gifts. When Specialty discovers a new toy with market potential, it chooses an October market entry date. In order to get toys in its stores by Oct, Specialty places one-time orders with its manufactures in June or July of each year. Demand for children’s toys can be highly volatile. If a new toy catches on, a sense of shortage in the market place often increases the demand to high levels and large profits can be realized. However, new toys can also flop, leaving Specialty stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is deciding how many units of a new toy should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are…arrow_forward
- MATLAB: An Introduction with ApplicationsStatisticsISBN:9781119256830Author:Amos GilatPublisher:John Wiley & Sons IncProbability and Statistics for Engineering and th...StatisticsISBN:9781305251809Author:Jay L. DevorePublisher:Cengage LearningStatistics for The Behavioral Sciences (MindTap C...StatisticsISBN:9781305504912Author:Frederick J Gravetter, Larry B. WallnauPublisher:Cengage Learning
- Elementary Statistics: Picturing the World (7th E...StatisticsISBN:9780134683416Author:Ron Larson, Betsy FarberPublisher:PEARSONThe Basic Practice of StatisticsStatisticsISBN:9781319042578Author:David S. Moore, William I. Notz, Michael A. FlignerPublisher:W. H. FreemanIntroduction to the Practice of StatisticsStatisticsISBN:9781319013387Author:David S. Moore, George P. McCabe, Bruce A. CraigPublisher:W. H. Freeman