1. Estimated cost of a Geoffrey Doll, the specialty-branded doll #106, and a cradle
Based on the internal cost study, the costs of Geoffrey Doll and the specialty branded doll #106 changed drastically. There was no change in the costs of the cradle as the Springfield plant is very labor intensive. Below are the calculations for the total cost of each type of doll & the cradle:

Cost Breakdown (in $) Geoffrey Doll Specialty Branded Doll #106 Cradles
Direct Labor Cost 3.00 3.75 7.50
Direct Material Cost 5.00 6.00 12.00
Total Manufacturing Overhead (details in Appendix) 7.22 25.36 4.22
Total Cost 15.22 35.11 23.72

Revised costs at the Chicago facility are based on Internal Cost Study:
• Labor and Material cost remain the same as these are direct costs
• Machine Related costs are allocated in the ratio of the machine hours required for the production of each item
• Plant management and facilities related costs are calculated using the old methodology and are allocated in the ratio of direct labor cost
• Set up labor cost is allocated in the ratio of number of setup hours required to produce each unit
• Receiving and production control cost is allocated in the ratio of production/machine runs required to produce each unit as per assumption 3 in the internal cost study
• Packaging and shipping costs are allocated in the ratio of number of shipments as per assumption 4 in the internal cost study.

2. Profitability comparison of each doll under the new and old systems
From the table below, we observe that Geoffrey dolls are much more profitable than the specialty branded doll #106 (28% vs 2%). Also, there is a huge discrepancy in the margins calculated for both these dolls by the old vs the new method. This discrepancy is arising due to the high manufacturing overheads (especially, the setup labor cost, receiving & production control cost and