Toy World Essay

1403 words - 6 pages

At Toy World Inc., President Jack McClintock is considering the adoption of a level monthly production plan for the coming year. The manufacturer of children’s plastic toys currently employs a production plan that follows the seasonality of sales. In considering whether to implement a level monthly production schedule, we compared the benefits and costs of both methods in relation to the financial and operational needs of the business. This allowed for an in-depth analysis of the savings allowed by a level monthly production schedule, and the impact of such a system on timing, cash flow and risk. As a toy manufacturer, Mr. McClintock’s company would face unique risks under the ...view middle of the document...

Level monthly production would also allow Mr. McClintock to benefit from greater flexibility in filling emergency production orders during off-peak times, as production would be maintained regardless of sales. Another advantage of the proposed production system is the positive impact on employees; training needs would be reduced, as workers would not need to relearn their operations as sales increase, and employee burnout would be mitigated during peak season. Net income in 1994 would also be higher under level monthly production than seasonal ($589,000 and $351,000, respectively), if change in interest expense is ignored. Finally, the proposed plan would improve the liquidity of the company, as demonstrated by a higher current ratio (see Appendix 3).
Costs of Level Monthly Productions
The primary cost of a level monthly production plan is a constrained cash flow. Cash would need to be committed towards increased storage and handling costs amounting to $115,000 annually, which would be incurred during the months when production would exceed sales. Seasonal production does not have this expense as production occurs in response to customer orders. Therefore, the $490,000 labour cost savings would be offset by this expense. Cash flow is further restricted due to accounts payables being maintained levelly through the year. Under level monthly production, raw materials would need to be purchased regularly every month regardless of customer demand. This would result in additional funding requirements beginning in March, and the short-term loan amount would rise until the company receives payment from sales in August; the loan would begin to be paid off in November.
A constricted cash flow is a further cost to Toy World Inc. because it would result in less interest income being earned by the company. Under level monthly production, cash would be kept at the minimum level of $200,000 every month except for January and February, which is lower than the balance under a seasonal schedule. Since Toy World Inc. is earning a 4% annualized rate of return on monthly cash balances, a reduction in interest income would be experienced by the company, thus further cutting into the savings allowed by level monthly production.
Level monthly production would also require a greater external financing need than seasonal production; from June to November, a funding requirement of over $2 million is necessary, with the maximum reaching almost $4 million in September (see Appendix 1). This is problematic because Toy World Inc.’s primary bank, City Trust Company, has stated a willingness to only extend their existing line of credit to $2 million. Therefore, the current credit limit is not sufficient to cover the financial need of a level monthly production plan. If Mr. McClintock were to meet the financing requirements of this plan through an additional loan, he would need to consider the increased interest expense that would result. Financing up to $4 million with...

Other Essays Like Toy World

Toy Project Essay

562 words - 3 pages Jason Fidalgo Health, Safety, and Nutrition for the Young Child Program # 45811105 lesson # 405498 Exam# 405498 Student ID # 21954934 Exam name Graded Toy Project Toy 1 : Pop Up Picture Book Description: This is a pop up picture book. Depending on the age of the child, the book teaches them many different things. Why is this toy developmentally appropriate for a child in this age group? This is appropriate for this age

Toy Store Practicum Essay

1015 words - 5 pages The part that the toy store industry plays in creating gender. References to Susan Willis' essay "Gender as Commodity"Toy Store PracticumSusan Willis, in her essay "Gender as Commodity," states, "Our culture is mass culture, where one of the strongest early influences on gender is the mass toy market.... In today's toy market there is a much greater sexual division of toys defined by very particular gender traits than I'd say has ever existed

Uas Toy Company

2339 words - 10 pages | USA Toy Company | Memo To: Company CEO From: Plant Manager CC: Company Attorney Date: 5/18/2013 Re: Companies Response to an Ex-Employee’s Claim of Constructive Discharge and the Federal Equal Employment Opportunity (EEO) Law How is Constructive Discharge Relevant to this Situation? Title VII of the Civil Rights Act of 1964 makes it illegal to discriminate against someone on the basis of their race, color, religion, national origin, or

Big Time Toy Maker

748 words - 3 pages Big Time Toymaker Ronda Bonny LAW/421 AUGUST 13, 2012 JAMES ZACCARIA Big Time Toymaker 1. At what point, if ever, did the parties have a contract? After reading the case scenario, I do not believe either of the two parties involved ever established a binding distribution contract. It is true an oral distribution agreement was achieved just three days prior to the 90-day deadline, which was a condition established in the original

The Toy Topic

1018 words - 5 pages The Toy Topic With catchy commercials and colorful advertising, commercials and toy catalogs target children of all ages to entice them into wanting that toy. Not all toys are good for the child. Some toys may encourage violence and aggression in some or all of the children. Other toys may promote pro-social behavior. Some toys may be designed with gender differences in toy selection, preference, and social encouragement of gender specific toys

The Toy Store

1070 words - 5 pages When I was six, my favorite toy was a stuffed rabbit I named “Scratchy.” The toy store had a small selection of stuffed animals, but most had some sort of theme to them, either Disney characters, or electronic motion-sensing kittens that “came to life” when you walked past them. Since Scratchy was a gift, I’m not exactly sure where he came from – probably not a Target. Lots of the toys in this section were bears, puppies, and

Case Scenario Big Time Toy Maker

741 words - 3 pages Case Scenario Big Time Toy maker Aragon Week4 Instructor Rosale Lopez April 16, 2014 Level One Heading Option Contract and Distribution Agreement After reading this scenario, Big time toy maker and Chou did take part in an oral

Principle of Marketing

925 words - 4 pages Bear to the highest position in the retail stores. Maxine Clark established a system where children come and by moving to various work stations step by step they make their own toy or stuffed animal unlike any other made anywhere in the world. This empowerment gives the customer more value than any other company. Maxine Clark sells the experience and not the product to the customer. This affordable empowerment of $10 to an average of $25 is the key

Kinder Surprise Advertisement

578 words - 3 pages SpA. Ferrero SpA is a very famous chocolate company; also it is one of the world’s largest chocolate producers. Ferrero produce many kind of chocolate, like Ferrero Rocher, kinder and so on, which are all well known over the world (James, P). The advertisement what I chose is about kinder surprise chocolate factory in 2010,. While kinder surprise is a series of kinder. Why it was called surprise? Because kinder surprise is like an egg, once

Demonstration of Kendama

727 words - 3 pages worldwide and from what I have learned there are many competitions held all over the world prizes ranging from trophies, the largest kendama made, and cash prizes as well. I believe that this toy is a great stocking stuffer, dramatically improves hand-eye coordination skills, attention-getting fun for all ages, and once you get started you won’t want to put the toy down.

Marketing Plan

3667 words - 15 pages :// Appendices Welcome Join the conversation. Share tips and solutions with fellow SFC products users from all around the world. Ask your question. Submit my question to the community. Welcome Join the conversation. Share tips and solutions with fellow SFC products users from all around the world. Ask your question. Submit my question to the community. Appendix 1: Sample

Related Papers

Toy Story 2 Essay

2459 words - 10 pages owner stooped caring about her toy because she grew up.Race: there is a high mix of races, almost every toy represents a different race, there are only few exceptions where you can match the same race, like Woody with the Cowgirl or Mr. and Mrs. Potato Head or the soldiers. The rest represents different races; even there are some toys that represent a race out of this world, like the aliens.Physical Ability: each toy has different physical

Lego Surviving In The 21st Century Toy Market

4155 words - 17 pages LEGO brand namely creativity, innovation, fun, play, and imagination. Target Audience LEGO is primarily a toy for kids. As such the main target audience for the global marketing communication strategy are children from different parts of the world. Parents play an important part in the choices of children. Parents influence which toys to play and the manner of play children develops. Therefore, parents also constitute the target

Toy Story Essay

519 words - 3 pages Balance Sheet Cash Accounts Recievable Inventory Current Assets Net plant and equipment Total Assets Accounts Payable Notes Payable, bank Accrued Taxes Long-term debt, current portion Current Liabilities Long-term Debt Shareholders' Equity Total Liabilities and Equity Actual Dec. 31, 1993 $200 2,905 586 $3,691 1,176 $4,867 $282 752 88 50 $1,172 400 3,295 $4,867 January $878 1,060 586 $2,524 1,176 $3,700 $36 0 31 50 $117 400 3,183 $3,700

Toy Library Essay

3067 words - 13 pages which provides a solution for the working parents and increases the interactivity among children from a very tender age which improves their overall personality. 1.2 Product KidzCraft has a range of products and services for children 1. Toy Retail. 2. Toy Rentals. 3. Day Care Centers. 4. Kids Entertainment. 5. Events for Kids for their overall development. 2.1 PEST Analysis 1. Political The Political situation in India has so far