only the multiple choice question.

(not the questions under the case.)

What is the core issue in the Johnson Toy Company case, related to the Jungle Jim the Jogger doll? 6. Unsold doll units with retailers 1. 2. Finished dolls in various warehouses 3. Unassembled components and parts 4. Raw material supply in transit 5. All the above Assuming there is no more demand for the Jungle Jim Jogger doll in the US market, what could be 7. some solutions to address the issue, and avoid the loss? 1. Ask retailers to give 50% discount and sell the doll as collector's item Give retailers credit for the return of unopened/unsold doll units, but share the cost of 2. reverse logistics. 3. Unassembled components and parts, as well as returned units can be recycled by transforming into another toy doll with some minor modifications for the next season 4. All the above 5. None of above The Jungle Jim the Jogger doll fiasco was an incident, which put to question the company's return 8. policy in the April 1 meeting of their management? a. True b. False 9. Before the Jungle Jim the Jogger doll issue, the policy followed by the company with larger accounts, % off the wholesale price to cover the according to Greg Sullivan (Controller), was to deduct defectives and then forget about everything. 25 a. 2 b. 5 c. 10 d. 20 e. 10. According to Amy Johnson, the company anticipates loss due to Jungle Jim the Jogger doll sales fallout in the market. a. True b. False CASE CASE 5.1 JOHNSON TOY COMPANY those present included Carolyn Coggins, the firm's sales manager; Cheryl Guridi, the logistics manager; Greg Sul- livan,, the controller; and Kevin Vidal, the plant engineer Coggins had just reported that she believed there were between 1.5 million and 2 million Jungle Jim the Jogger dolls in retail stores, and Sullivan had indicated there were 2,567,112 complete units in various public warehouses in Biloxi, Vidal said that he was still trying to count all the un- Located in Biloxi, Mississippi, the Johnson Toy Compa- ny is celebrating its seventy-fifth year of business. Amy Johnson, who is president, and Lori Johnson, who is vice president, family to be involved in the toy business. The firm manu- factures and sells toys throughout the United States. The toy business is very seasonal, with the majority of sales oc curring before Christmas. A smaller peak occurs in the late spring-early summer period, when sales of outdoor items are good. The firm relies on several basic designs of toys- are sisters and are the third generation of their assembled component parts, adding that one problem was that they were still being received from suppliers, despite the cancellation. Amy said, "Let's wait a few weeks to get a complete count of all the dolls and all the unassembled component which have low profit margins but are steady sellers-and on new designs of unconventional toys, whose introduc- tion is always risky but promises high profits if the item be- comes popular. The firm advertises regularly on Saturday morning television shows for children. Late last year, just befofe Christmas, the Johnson Toy Company introduced Junge Jim the Jogger doll, mod- cled after a popular television show. Sales skyrocketed, and every retailer's stock of Jungle Jim the Jogger dolls was sold out in mid-December; the Johnson Company could have sold several million more units if they had been available parts. Lori, I'm naming you to work with Carolyn and Kev- in to develop recommendations as to how we can recycle the Jungle Jim item into something we can sell. Given the numbers involved, I'm willing to turn out some innocuous doll and sell it for a little more than the cost of recycling because we can't take a complete loss on all these damned Jungle Jim dolls! Greg says we have nearly 2.6 million of them to play with, so let's think of something " "Your 26-million figure may be low," said Coggins "Don't forget that there may be nearly 2 million in the hands of the dealers and that they will return them." before Christmas. Based on the sales success of this doll, Amy and Lori made commitments to manufacture 10 mil- ion Jungle Jim the Jogger dolls this year and to introduce a wide line of accessory items, which they hoped every doll owner would also want to have. Production was well un- "Return them?" questioned Amy. "They're not de- fective. That's the only reason we accept returns. The re- tailers made a poor choice. It's the same as if they ordered sleds and then had a winter with no snow We are no more der way, and many retailers were happy to accept dolls in January and February because they were still a fast-selling item, even though the toy business itself was sluggish dur- ing these months Unfortunately, in the aftermath of a Valentine's Day responsible for Jungle Jim's sex life than they are Cheryl Guridi spoke up: "You may be underestimat- ing the problem, Amy. One of our policies is to accept the dealer's word as to what is defective, and right now there are a lot of dealers out there claiming defects in the Jungle Jim dolls. One reason that Kevin can't get an accurate count is that returned dolls are showing up on our receiving dock and getting mixed up with our in-stock inventory." "How can that happen?" asked Amy, angrily. "We're paying the freight, also, are we? "So paying the freight just to get rid of them" we've reccived several bills in which the retailer party in Hollywood, the television actor who portrayed Jungle Jim the Jogger became involved in a widely publi cized sexual misadventure, the details of which shocked and disgusted many readers and TV viewers, and we would be embarrassed to describe them. Ratings of the television series plummeted, and within a month it had been dropped not far, no, responded Gurid "The retailers are from the air. On March 1, the Johnson Company had can- celed further production of the Jungle Jim the Jogger dolls, although it had to pay penaltics to some of its suppliers because of the cancellation. The company had little choice because it was obvious that sales had stopped has deducted the costs of the Jungle Jim dolls and of the freight for shipping them back from what he owes us," said Sullivan. "That was one item I wanted to raise while we were together On April 1, a gloomy group assembled in the John- son Company conference room. Besides Amy and Lori, (ntiand) "Informal ones," was Coggins's response. "It depends on the salesperson and the account. I don't think there is much abuse, although there is some." "How do the goods get back to us under these cir- cumstances?" asked Amy "The salespeople either keep them and shuffle them about to other customers or-if it's a real loser-they ask us what to do," replied Coggins. "Greg," said Amy, "do our records reflect these "We can't allow that!" exclaimed Amy. "Don't be so sure," responded Sullivan. "The ac- count in question has paid every bill he's owed us on time for 40 years. Do you want me to tell him we won't reim- burse him?" "This is worse than I imagined," said Amy. "Just policies, Lori?" what are our return "Well, until today, I thought Lori. "One for our small accounts involves having salespeople inspect the merchandise when they make a sales call. They can pick it up and give the retailer credit off the next order." we had only two," said our returns and transfers "Oh, fairly well," was his response. "We lose track of individual items and quantities, but if the salesperson is honest-and I think ours are-we can follow the dollar amount of the return to the salesperson's inventory, to an- other retailer, or back here to us. We do not have good con- "Sometimes they pick up more than defective mer- chandise," added Coggins. "Often, theyll take the slow movers out of the retailer's hands. We have to do that as a sales tool." trols on the actual items that are allowed for returns. Kevin quite right," interjected Vidal. "Some- times, the returned items are just plain shopworn- scratched, dented, and damaged. That makes it hard for us because we have to inspect every item and decide whether and I have difficulty in reconciling the value of returned items that wind up back here. Carolyn's records say they're okay for resale, and Kevin says they're too badly damaged." "I insist on the reconciliation before we allow the "That's not goods back into our working inventory," said Guridi. "That way I know exactly what I have here, ready to ship." "You know, I'm finding out more information about it can be put back into stock. When we think a particu- lar salesperson is accepting too many shopworn items, we tell Carolyn, although it's not clear to me that the message reaches the salespeople in the field." "I wish I had an easy solution," said Coggins. "We used to let our salespeople give credit for defects and then destroy everything out in the field. Unfortunately, some abused the system and resold the toys to discount stores. At least now we can see everything we're buying back. I agree we are stuck with some shopworn items, but our salespeople a big sale quicker than for our with the retailer, on an item-by-item basis, as to whether something being returned happens to be shopworn." "Is there a limit to what a salesperson is permitted to allow a retailer to return?" asked Amy "Well, not until now," responded Coggins. "But with this Jungle Jim snafu we can expect the issue to occur. In fact, I have several phone queries on my desk concerning this. I thought I'd wait until after this meeting to return inventories and returns than I thought existed," said Amy "Too many trips to Paris, dearest," said Lori, and the others all suppressed smiles. Amy decided to ignore Lori's remark, and she looked at Guridi and asked, "Are you satisfied with your control over inventories, Cheryl?" "I have no problem with the ones here in Biloxi," was Guridi's response, "but I have an awful time with the in- ventories of return items that salespeople carry about with them, waiting to place them with another retailer. I'm not always certain they're getting us top dollar, and cach sales- person knows only his or her own territory When Carolyn and I are trying to monitor the sales of some new item, we never know whether it's bombing in some areas and riding around in salespeople's "Have you now described our returns policy, such as it is?" asked Amy, looking at everybody in the room. are out there to sell, and nothing would ruin salespeople to start arguing cars as they try to sell it again." them." "No," was the response murmured by all. Sullivan spoke: "For large accounts we deduct a straight 2 percent off wholesale selling price to cover defectives, and then we never want to hear about the defectives from these ac- "Well, I think we'd better establish limits-right now," said Amy "Be careful," said Lori. "When I was out with the salespeople last year, I gathered the impression that some were able to write bigger orders by implying that we'd take the unsold merchandise back, if need be. If we assume that risk, the retailer is willing to take more of our merchandise." "Are there no limits to this policy?" asked Amy. Counts at all." "That sounds like a better policy," said Amy. "How well is it working?" "Up until Jungle Jim jogged where he shouldn't, it worked fine. Now a number of large accounts are pleading Guridi asked, "Could we have field representatives who do nothing but deal with this problem? The retailers onto the defectives until our claims special circumstances' or threatening to take back the dolls." sue if we don't "They have no grounds for suit," declared Amy "You're right," said Coggins, "but several of their buyers are refusing to see our sales staff until the matter is resolved. I just heard about this yesterday and meant t bring it up in today's meeting I consider this very serious." "Damn it!" shouted Amy, pounding the table with her fist. "I hope that damned jogger dies of jungle ro We're going would be told to hang reps arrive." Coggins replied, "That would be expensive, because most retailers have little storage space for anything and would expect our claims rep to be there immediately. Besides, it might longer they talked about new orders." That may be," interjected Amy, "but we cannot telling me how the return policy works, or doesn't work, as continue having each salesperson tailoring a return policy the case may bel Why can't we just have a policy of all sales for each retailer. That's why we're in such a mess with the being final and telling retailers that if there is an honest jogger doll. We have to get our return policy established, defect they should send the goods back here to us in good made more uniform, and enforced. We cannot go through another fiasco like Jungle Jim the Jogger for a long time. We're going to lose money this year, no matter what, and I have already told Kevin that there will be virtually ey available for retooling for next year's new products." to undermine our selling efforts if retailers could returns to negotiate with as use no lose money this year, and now you're all to old Biloxi?" "Most of the small accounts know nothing about shipping," responded Vidal. "They don't know how to pack, they don't know how to prepare shipping documents, and they can't choose the right carriers. You ought to see the hodgepodge of shipments we receive from them. In more cases than not, they pay more in shipping charges than the products are worth to us. I'd rather see them de- stroyed in the field." Sullivan spoke up. "Td object to that. We would need some pretty tight controls to make certain the goods were actually destroyed. What if they are truly defective, but im- properly disposed of, then fall into the hands of children who play with them and the defect causes an injury? Our name may still be on the product, and the child's parents will no doubt claim the item was purchased from one of our retailers. Will we be liable? Why can't we have every- thing come back here? We have enough volume of some returned items that we could think in terms of recycling parts." Vidal responded, "Recycling is a theoretical solution to such a problem, but only in rare instances will it pay. In most instances the volume is too small and the cost of tak- ing toys apart is usually very high. However, the Jungle Jim product involves such a large volume that it is prudent and reasonable to think up another product that utilizes many of the parts. It would even pay to modify some machines for disassembling the Jungle Jim doll." no mon- QUESTIONS 1. From the standpoint of an individual concerned with ac- counting controls, discuss and evaluate Johnson Toy Com- pany's present policies for handling returned items 2. Answer Question 1, but from the standpoint of an indi- vidual interested in markcting 3. Propose a policy for handling returns that should be adopted by the Johnson Toy Company. Be certain to list circumstances under which exceptions would be allowed. Should it apply to the Jungle Jim dolls? 4. Should this policy, if adopted, be printed and distributed to all of the retailers who handle Johnson Toy Company products? Why or why not? If it should not be distributed to them, who should receive copies? 5. Assume that it is decided to prepare a statement on returns to be distributed to all retailers and that it should be less than a single double-spaced page. Prepare such a statement 6. On the basis of the policy in vour answer to Question 3, de- velop instructions for the Johnson Toy Company distribu- tion and accounting departments with respect to their roles and peocedures in the handling of returns 7. Assume that you are Cheryl Guridi, the firm's logistics manager. Do you think that the returns policy favored by the logistics manager would differ from what would be best for the firm Why or why not 8. Unnil the policy you recommend in your answer to Ques- tion 3 takes effect, how would you handle the immediate problem of retailers wanting to return unsold Jungle Jim the Jogger dolls "As I listen to this discussion," said Lori, "one fact becomes obvious: We will never have very good knowl edge about volume or patterns of returns until it's too late. That's their very nature