Ref. No.

: QM0020

Akshara Toys Limited

Deepika Jain, a fresh commerce post-graduate, enjoys the company of children, particularly of
tiny toddlers who are just getting to know the world. Living in a joint family, she had several of them
closely attached to her within the household and always looking forward to their ‘Gudiya Akka’ (as
she was lovingly addressed by the kids) for their supply of toys. However, soon she realised that most
of the toys available in the market were attractive at first sight, but had little creative or learning
values attached to them. Consequently, children soon lost interest in them.
Coming from a business family, she decided to merge her love for children with a business
opportunity: that of making creative and educative toys for children. After interacting with some
kindergarten teachers, like-minded toy designers and a quick local survey, she zeroed in on three
robust wooden toys (A, B and C) and set up Akshara Toys Limited (Akshara). In a span of 6 months,
Akshara had grown well and stabilised on production and profits. Deepika was happy and contended
with a monthly production of 800 pieces of toy A, 600 pieces of toy B and 300 pieces of toy C, with
an overall profit of INR 17,050 at a profit rate of INR 11, INR 9.5 and INR 8.5 per piece for toys A,
B and C respectively.
The production of toys at Akshara involves three operations: Cutting, Shaping and Packaging.
Each of these operations is carried out on different machines. Time availability and requirement (in
hrs.) for the production process is as follows (Exhibit I):

This case study was written by Prof. L. Shridharan, Department of Decision Sciences, IBS, Hyderabad. It is intended to be used as the
basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was
written from generalised experiences.

© 2009, IBSCDC.
No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever
without the permission of the copyright owner.

License to use for the Class of 2012,

Semester I, IBS Hyderabad.
Course: Information Systems for Managers
 Akshara Toys Limited

Exhibit I
Time Availability and Requirement for the Production Process
Activity Time required (in hours) for
Machine time available
Toy A Toy B Toy C per month (in hours)

Cutting 0.9 0.4 0.6 1350

Shaping 0.2 0.3 0.2 410.4
Packaging 0.07 0.15 0.05 145

Prepared by the author

Around this time, her cousin, Vishal Jain, 2 years younger than her, returned from the US after
completing his MBA from a leading B-School. While Deepika was very contended with her level of
business operations, Vishal was clearly dissatisfied. He felt that Deepika was not achieving the best
with the available resources. Given this, Vishal was aghast when he heard Deepika saying that she
had been planning to increase production by augmenting the packaging capacity by 55 hrs. per month
with new machinery (having 10 years’ useful life) by borrowing capital at 15% per annum.
He got further shocked when Rishabh (another common cousin of theirs) told him that Deepika
had also been considering replacing the old cutting machine with a new one (having 10 years’ useful
life), which would cost INR 250,000. Nevertheless, the new machine would reduce the cutting time
to 0.3 hour for toy A, 0.2 hour for toy B and 0.3 hour for toy C. With the variable cost of operating
the new cutting machine placed at the same rate as that of the old machine (INR 4.50 per hour),
Deepika was convinced that the savings in cost will justify the purchase of the new machinery.
However, Vishal is not at all happy with this knee jerk approach of Deepika. He wants more
convincing justifications for each of Deepika’s plans. How should he proceed to help Deepika?