Toysplus Inc.

Essay by pooh_cantona August 2003

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1. Economic order quantities calculations:

In this case study, I use POQ to calculate Optimal Quantities to Order because some the parts are made by company's plastic-molding machines in an assembly operations and units can be assumed that are received incrementally during production. We also have the following assumptions:

- Only one item is involved because each type of toy has its own assembly line, only one toy can be assembled at a time on this line.

- Annual Demand is known

- Usage rate is constant

- Usage occurs continually but production occurs periodically

- The production rate is constant ( i.e. production rate of Toy Auto is 3500, Toy Truck, 1750; Toy Robot, 2333)

- There are no quantity discounts

Thus, we have to find out the Set up cost, Holding cost, Demand per year, Demand per week and production rate.

Therefore, we have

Ø Set up Cost:

According to the case study, we have the shop labor rate is the sum of $6 per hour for wages, 33% fringe benefits and $6 per hour charged for overhead.

Moreover, line 1 has 10 workers who engage in assembly. Thus, the setup cost is:

S = 1 hour * 10 workers * ( $6 wages + 0.33*6 benefits+ $6 overhead )

= $140

Ø Holding Cost:

There is some ambiguity here. The subcomponent costs in Exhibit 4 do not always add up to the Cost Each (e.g. the cost for Auto is $3.9) which is level 0 item cost. So I assumed that Line 1 labor costs (at a fully burdened $6 + 0.33*6 + $6 = $ 14 per hour) were not included.

Hence, Item Cost per unit is the sum of Cost Each Item and the labor cost per item. You can see the results of Item...