ACCT 210 Lecture 15: QNT561_r9_SuperFun_Case_Study_Week_3

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5 Feb 2019
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Case Study SuperFun Toys
QNT/561 Version 9
1
Copyright © 2017 by University of Phoenix. All rights reserved.
University of Phoenix Material
Case Study SuperFun Toys
SuperFun Toys, Inc., sells a variety of new and innovative children’s toys. Management learned 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 SuperFun discovers a new toy with good market potential, it
chooses an October market entry date. To get toys in its stores by October, SuperFun places one-time
orders with its manufacturers in June or July of each year.
Demand for childrens 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 SuperFun 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.
This is where SuperFun feels that you, as an MBA student, can bring value.
For the coming season, SuperFun 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 Teddys hand, the bear
begins to talk. A built-in barometer selects one of five responses predicting the weather conditions. The
responses range from It looks to be a very nice day! Have fun to I think it may rain today. Dont forget
your umbrella.” Tests with the product show even though it is not a perfect weather predictor, its
predictions are surprisingly good. Several of SuperFuns managers claimed Teddy gave predictions of the
weather that were as good as many local television weather forecasters.
As with other products, SuperFun 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.
Having a sound background in statistics and business, you are required to perform statistical analysis and
the profit projections which is typically done by the product management group. You want to provide
management with an analysis of the stock-out probabilities for various order quantities, an estimate of the
profit potential, and to help make an order quantity recommendation.
SuperFun expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains
after the holiday season, SuperFun will sell all surplus inventories for $5 per unit. After reviewing the
sales history of similar products, SuperFuns 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.
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