Gg Toys Case Study

From the calculations above we assume that implementing another cost calculation system, Activity Based Costing (ABC), would be more accurately representing the costs at G.G. Toys. Even though the calculations only apply to the Chicago plant it is suggested that the company will implement ABC costing method in both of their plants. The reason for this proposition is so the comparison of the plants will be possible and give a good view of how they are performing.

As is stated in the case the marketing environment is becoming even more competitive and thus more important for GG toys to have a robust system (Beheshti, 2004). An alarm that their current system is not displaying the numbers correctly should be their mismatch in estimated revenue

By looking further into costs the awareness should increase (Antikainen, Roivainen, Hyvärinen, Toivonen, & Kärri, 2005). Knowing what each activity costs opens up an opportunity that allows managers to improve and therefore reduce the cost where possible (Cooper & Kaplan, 1991).

Overall, changing the system at G.G. toys could enhance their performance as ABC-costing system has been linked to both the product being of better quality and the cycle time being shorter (Ittner, Lanen & Larcker, 2002). Cooper and Kaplan (1991) discuss that having an ABC costing system could have a financial gain for companies. Managers decision are critical, especially if the strategy is to earn profit. The ABC-costing system could point managers to decision that would enable the company to make more profit. The price of products should be reconsidered. In some cases, for the company to be copmetitive, prices will have to be dropped for products that are produced in large batches and in other cases the price should be increased for more specialized products that demand more (Cooper & Kaplan, 1991). For G.G. toys this information would certainly serve a great purpose and most likely lead to an increase in the price of the speciality