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Gg Toys Case Analysis

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G. G Toys Case Analysis

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Managerial Accounting

June 16, 2013

Costing systems are components of a broader accounting system used by a given company or organization. Their main function is to keep a focused eye on expenditures made by the company in question. Synthesis of Existing Cost Models to Meet System of System Needs, p.86. G.G. Toy's production process for dolls started with the basic raw materials needed for the bodies of the dolls, wool and things for the hair and clothing and all of these things were consist in production initially. Then, in its modern Chicago manufacturing facility, the company machine-molded the vinyl and resin into doll bodies and even had varies different styles and designs for the clothing. While using the same equipment and labor, they had to schedule when each of these modern jobs could be completed. I believe that explains why there was less units produced.
Today’s new manufacturing environment requires new cost-accounting systems as well as new technology. It’s simple, updating the present system can achieve greater benefits in terms of producing and providing information for decision making in the future. (Updating Standard Cost Systems, Cheatham, C, Quonum Books, 1993). Therefore, I believe that G.G. Toys should change its existing cost accounting system from traditional costing to activity-based costing in the Chicago plant. Activity-based costing also known as ABC is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. This model assigns more indirect costs or overhead into direct costs compared to conventional costing. (Wikipedia.com). With the overhead at the Chicago plant being so big, the cost accounting system being accurate is very important and required.

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