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Student Name: Shunde Tu Student ID: 000196745 Course: MGT 121( Financial Management II) Case Study on Toy World Situation Audit Plastic Toys Manufacturing Industry Overview Highly seasonal, with a majority of sale volume generated between Aug. and Nov. Competitive landscape Highly competitive, populated by a large number of companies Fierce design and price competition, with short product lives and a relatively high rate of company failures Low entry barrier resulted from low capital and technology requirements. Influx of imported toys intensified competitive pressure on smaller firms. Company Overview The company studied in the case is Toy World, a manufacturer of plastic toys for children. More than 80% of the sale was generated between Aug to Nov. Toy World Inc.’s practice was to produce in response to customer orders. Therefore, the production was highly seasonal, and not more than 25%-30% of manufacturing capacity was used for the first seven months. Product Overview Produce a wide range of designs, colors and sizes for most of its product categories. Dollar sales of a particular product had sometimes varied by 30%-35% from one year to the next. Problem Statement The company’s production had been scheduled to accommodate the seasonality of sales. The production manager proposed to adopt level production to reduce labor costs. The feasibility and benefit of adopting level production would be studied in detail. Problem Breakdown and Analysis Pros and Cons of Seasonality Production, as compared with Level production Advantages of Seasonality Production Lower Inventory. Less storage and handling cost Be able to respond to market changes. Since the sales of a particular product varies greatly year from year, it’s difficult to forecast the sales precisely, under level production Disadvantages of Seasonality Production Overtime premiums reduced profits Seasonal expansion and contraction of work force resulted in recruiting difficulties and high costs ass