Toy World case Solution
Toy World is a plastic toy manufacturing company founded in 1973. Originally a partnership
incorporated in 1974. The company operated in a highly competitive market with low entry
barriers. Following the trend and inventing were critical factors to remain in the business.
Factors to be considered are Overtime premiums
 Direct labor savings
 Storage costs
 Inventory cost
 Operating cost
 Cashflow
 Customer experience
Given Data:
Solution:
In case of seasonal production, the production quantity is different every month based on
seasons or order received. Therefore, inventory cost is lower, operating cost is higher and its
difficult to manage resources according to production requirement.
However, in case of level production equal quantity is produced every month causing high
inventory cost and low operating cost giving better experience to the customers as well as
company due to improved quality control and better cashflow.
We can infer from the solution stated above, due to application of level production
methodology over seasonal production methodology there has been elimination of overtime
premiums by $225,000 and direct labour saving of $ 265,000. This has also resulted in the
increase of storage cost by $ 115,000. Therefore, total savings of $375,000.
Additionally, cost of goods sold reduced from 70% to 65.1% of total sales.