Toy world case study
TOYWORLD
CASE STUDY
Prepared By:
ABDULLAH AL-SHAHRANI
MOHAMMED AL-JUHANI
Background:
ToyWorld, Inc. was founded in 1973 by David Dunton. Before that, he had been employed as production manager by a large manufacturer of plastic toys. Mr. Dunton and his former assistant, Jack McClintock, established Toy World, Inc. with their savings in 1973. Originally a partnership, the firm was incorporated in1974, with Mr. Dunton taking 75% of the capital stock and Mr. McClintock taking 25%. The latter served as production manager, and Mr. Dunton, as president, was responsible for overall direction of the company’s affairs. After a series of illnesses, Mr. Dunton’s health deteriorated, and he was forced to retire from active participation the business in 1991. Mr. McClintock assumed the presidency at that time. In 1993, Mr. McClintock hired Dan Hoffman as production manager. ToyWorld, Inc. Manufacturer of plastic toys for children. Because it is a toys company, their production schedules had always been highly seasonal.
Case Facts:
Toy World, Inc. had experienced relatively rapid growth since its founding and had enjoyed profitable operations each year since 1976. Sales had been approximately $8 million in1993, and on the strength of a number of promising new product sales were projected at $10million for 1994. Net profits had reached $270,000 in 1993 and were estimated at $351,000 in 1994 under seasonal production.
The cost of goods sold had averaged 70% of sales in the past and was expected to be the same in 1994 under seasonal production. However, the cost of goods sold under level monthly production will be 65.1% of sales.
The company had periodically borrowed from its primary bank, City Trust Company, on an unsecured line of credit. A loan of $752,000 was outstanding at the end of 1993. Mr. McClintock had been assured that the bank would be willing to extend a credit line of up to $2 million in 1994, with the
CASE STUDY
Prepared By:
ABDULLAH AL-SHAHRANI
MOHAMMED AL-JUHANI
Background:
ToyWorld, Inc. was founded in 1973 by David Dunton. Before that, he had been employed as production manager by a large manufacturer of plastic toys. Mr. Dunton and his former assistant, Jack McClintock, established Toy World, Inc. with their savings in 1973. Originally a partnership, the firm was incorporated in1974, with Mr. Dunton taking 75% of the capital stock and Mr. McClintock taking 25%. The latter served as production manager, and Mr. Dunton, as president, was responsible for overall direction of the company’s affairs. After a series of illnesses, Mr. Dunton’s health deteriorated, and he was forced to retire from active participation the business in 1991. Mr. McClintock assumed the presidency at that time. In 1993, Mr. McClintock hired Dan Hoffman as production manager. ToyWorld, Inc. Manufacturer of plastic toys for children. Because it is a toys company, their production schedules had always been highly seasonal.
Case Facts:
Toy World, Inc. had experienced relatively rapid growth since its founding and had enjoyed profitable operations each year since 1976. Sales had been approximately $8 million in1993, and on the strength of a number of promising new product sales were projected at $10million for 1994. Net profits had reached $270,000 in 1993 and were estimated at $351,000 in 1994 under seasonal production.
The cost of goods sold had averaged 70% of sales in the past and was expected to be the same in 1994 under seasonal production. However, the cost of goods sold under level monthly production will be 65.1% of sales.
The company had periodically borrowed from its primary bank, City Trust Company, on an unsecured line of credit. A loan of $752,000 was outstanding at the end of 1993. Mr. McClintock had been assured that the bank would be willing to extend a credit line of up to $2 million in 1994, with the