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Case, Toy World

Case, Toy World - • Storage costs o $115,000 spread out...

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Case: Toy World Factors to consider: o If switch to level production, will savings in worker training, overtime costs exceed increases in inventory costs? o Also consider effect on your machines (year-round use is better) Savings: o Less confusion: Direct labor savings of $265,000 o Estimated $225,000 in overtime costs Question: o Should we switch to level production instead of seasonal? Overtime/ training savings reflected in reduction of CGS
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Unformatted text preview: • Storage costs: o $115,000 spread out over 12 months (operating exp.) o End inv. = beg. Inv + purchases – costs/ CGS o Purchases = annual CGS/ 12 months • Accrued taxes = previous month accrued taxes + income taxes (from I/S) o In March we pay off taxes owed from last year • Outcome: o By switching to level, we’ve increased net profit by taking on more risk...
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