ntroducing a New Toy Case Study

ntroducing a New Toy Case Study

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Introducing a New Toy Case Study

Introducing , New ,Toy ,Case Study

 

Have to use excel for calculations and then prepare managerial report in word document.

Specialty Toys, Inc. sells a variety of new and innovative children’s toys. Management learned that the pre-holiday season is the best time to introduce a new toy, because many families use this time to look for new ideas for December holiday gifts.

When Specialty discovers a new toy with good market potential, it chooses an October market entry date. In order to get toys into its stores by October,

Specialty places one ­time orders with its manufacturers in June or July of each year. Demand for children’s toys can be highly volatile. If a new toy catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits can be realized. However, new toys can also flop, leaving Specialty stuck with high levels of inventory that must be sold at reduced prices.

The most important question the company faces is deciding how many units of a new toy should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales.

For the coming season, Specialty plans to introduce a new product called Weather Teddy. This variation of a talking teddy bear is made by a company in Taiwan.

When a child presses Teddy’s hand, the bear begins to talk. A built-in barometer selects one of five responses that predict the weather conditions.

The responses range from “It looks to be a very nice day! Have fun” to “I think it may rain today. Don’t forget your umbrella.” Tests with the product show that, even though it is not a perfect weather predictor, its predictions are surprisingly good.

Several of Specialty’s managers claimed Teddy gave predictions of the weather that were as good as those of many local television weather forecasters. As with other products, Specialty faces the decision of how many Weather Teddy units to order for the coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, or 28,000 units.

The wide range of order quantities suggested indicates considerable disagreement concerning the market potential.

The product management team asks you for an analysis of the stock­out probabilities for various order quantities, an estimate of the profit potential, and help with making an order quantity recommendation.

Specialty expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains after the holiday season, Specialty will sell all surplus inventory for $5 per unit.

After reviewing the sales history of similar products, Specialty’s senior sales forecaster predicted an expected demand of 20,000 units with a .95 probability that demand would be between 10,000 units and 30,000 units.

Managerial Report

Prepare a managerial report that addresses the following issues and recommends an order quantity for the Weather Teddy product.

1. Use the sales forecaster’s prediction to describe a normal probability distribution that can be used to approximate the demand distribution. Sketch the distribution and show its mean and standard deviation.
2. Compute the probability of a stock out for the order quantities suggested by members of the management team.
3. Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales 5 10,000 units, most likely case in which sales 5 20,000 units, and best case in which sales 5 30,000 units.
4. One of Specialty’s managers felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?
5. Provide your own recommendation for an order quantity and note the associated profit projections. Provide a rationale for your recommendation.

RUBRIC
Excellent Quality 95-100%	Introduction 45-41 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.		Literature Support 91-84  points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.			Methodology 58-53 points Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score 50-85%	40-38 points More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.		83-76  points Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.			52-49  points Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality 0-45%	37-1 points The background and/or significance are missing. No search history information is provided.		75-1 points Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.			48-1 points There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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