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Toy world - $265k from a more orderly production process...

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Toy World, Inc. is a toy manufacturing business who manufacture plastic toys for children. Jack McClintock is President and partial owner of Toy World. This toy business is a seasonal business with most of the sales coming between August and December. Since its inception Toy World has followed a seasonal production schedule to match customer demand. His new production manager, Dan Hoffman has become concerned with Toy World's method of scheduling production. He has urged McClintock to change methods to a level production schedule. Hoffman's main arguments are that Toy World could save money at about $225k from overtime premiums during peak production times as well as an additional
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Unformatted text preview: $265k from a more orderly production process. Hoffman has also conceded that part of the savings would be offset by about $115k in additional storage and handling costs. Another important factor in Hoffman's case is that Toy World will approach full capacity during 1994's peak season production. Due to recent expansions Toy World has a strained working capital position and would most likely have trouble affording another expansion in the near future. McClintock knows that Hoffman may be correct but he was uncertain what the impact of level production on other phases might be....
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