Hi-Ho Yo-Yo Inc. Harvard Case Solution & Analysis

History of the Company

Hi-Ho Yo-Yo Inc. was established in 1993 that makes logos for yoyos. It was founded by two school former students who thought that there must be a substitute for the video game craze. By conducting mass marketing search and observing the demand, they decided to establish their company on YO-YOs. The most important target market of the corporation was intended towards parents and grandparents to a certain extent and then it was aimed towards kids who would play with the Yo-Yos in reality. The company has earned productivity, which can be seen from the fact that from the year of 1996 and onwards; the sales and earnings of the company have increased on a yearly basis. The company produces four different lines of yo-yos products that they sell through two different distribution channels.

hi-ho yo-yo inc case study solution

hi-ho yo-yo inc case study solution

The four lines of yo-yos include premium prestige, superior prestige along with prestige and lastly custom that includes premium prestige custom and prestige custom. The company owns three distribution warehouses situated in Boston, Chicago and San Francisco where it stocks up its completed manufactured goods for delivery to clients. The performance of the company increased in the year of 2003 as compared to that in 2002. The increase in sales was about 5%; which was more in the year 2003 as compared to the year 2002.

The company has three lines of productions and each day sample of 100 Yo Yos from each line are verified systematically. The defects in the products are classified into seven categories. These categories include: Falls Apart, Scratched Finish, Over Pressed, Glue Bleed, Mismatched Halves, Rough Dowel and Fail to Unwind.

Problem Statement

The problem that the company is currently facing is related to the identification of the reasons behind the rejection of the products by customers. In addition, the second problem is to examine the areas that should be considered in order to improve the profit and loss statement of the company.

Analysis of the Case

The performance of the company in the year of 2003 was much better than the year of 2002. Sales of the company in the year 2003 increased by 5% from the year 2002. The prices of the product were flat in both the years 2003 and 2002 and were expected to remain flat in the year of 2004 as well. The overall net profit of the company in the year 2003 increased by 11.86% as compared to the previous year.

SUMMERY

OVER PRESSEDGLUE BLEEDROUGHT DOWELFAIL TO UNWINDTOTAL
LINE 1

62

62

LINE 2

20

20

LINE 3

76

62

138

TOTAL

220

After analyzing the rejection report, the summary has been made regarding the production line 1, 2 and 3. The pattern can be seen in the log that most of the rejection judgment has been taken from a particular line of production. Line no. 1 has the issue of over pressed, line 3 has problem with glue bleed and fail to unwind and rough dowel problem is found in line 2.

It shows that every 9000 pieces inspected last month have got the rejection probability of 2.44%

After analyzing the rejection file, the cost has to be determined in order to see that how much cost the company has to bear in each rejection scenario. This will be calculated by HHYY Master File, which shows the cost of direct production on each step.

COST

LABOUROHMATERIALFDCTOTAL

0.22

0.57

0.39

1.18

2.36

LINE 1

13.64

35.37

24.22

73.21

146.44

LINE 2

4.40

11.41

7.81

23.62

47.24

LINE 3

30.35

78.73

53.91

162.96

325.94

TOTAL

519.62

The cost on the Master File was given in the form of every 1000 units and the costs were divided into 5 different categories. In order to calculate the cost of production, the weighted average cost has been taken according to the product line i.e. 5% for premium prestige, 20% for superior prestige, 45% for prestige, 5% for custom premium and 25% for prestige custom. After converting it into per unit form, the individual cost and the cost of the wastage has been calculated for the respective month.

The extra rework in the last month due to rejection impacts the moral of workers and the cost of rework per unit is effective as the overhead cost per unit is high than the cost of labor and material. The rejected units must be .........................

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