242512625 G G Toys Case Solution

Topics: Cost accounting, Doll, Cost Pages: 3 (431 words) Published: December 30, 2014

G G Toys
Case ID - 105005     Solution ID - 2429     1477 Words Abstract
G.G. Toys is a doll producing company with plants operating in Chicago and Springfield. In 2000 the company faced a decline in margins. In order to reduce production cost they planned to shift the production from Geoffrey dolls to specialty dolls. The firm was based on the traditional cost system which allocated all the overheads on the basis of direct labor cost. For the Chicago plant this costing system was not appropriate. The new ABC system is recommended for the plant which showed that as the margin from specialty dolls is only 3%; it should be closed down. Using these new results it is recommended that more Geoffrey dolls be produced. Moreover the excess capacity in the plant could be used to manufacture cradles and shut down the Springfield plant. Also the scraps from Pajamas can be used to introduce another product line. These recommendations will enable the firm to increase its profitability. Excel Sheet

Manufacturing Overhead
Plant Cost per unit
Machine Related Expenses per unit
Setup Labor per product
Shipment cost per unit
Cost per unit
Total Overhead Cost per unit
Product Cost for Geoffrey Doll,Speciality doll #106, Cradles Direct Material
Direct Labor
Manufacturing Overheads
Profitability for Geoffrey Doll, Speciality doll #106, Cradles Traditional Costing
ABC Costing
Questions Covered
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? 2. Calculate the cost of a Geoffrey doll, the specialty-branded doll #106, and a cradle using the cost study conclusions. 3. Compare and contrast the profitability of each doll under the new and old systems. Based on your recomputed product costs, what actions would you recommend the company consider to enhance its profitability? What additional information would you like to have to make these...
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