Question

Mattress​ Wholesalers, Inc. is constantly trying to reduce inventory in its supply chain. Last​ year, cost of goods sold was ​$7.55 million and inventory was ​$1.52 million. This​ year, costs of goods sold is ​$8.62 million and inventory investment is ​$1.58 million. ​a) What was its weeks of supply last​ year? 10.47 weeks ​(round your response to two decimal​ places). ​b) What is its weeks of supply this​ year? nothing weeks ​(round your response to two decimal​ places).

Answer 1

Answer:

a)  There is 10.48 weeks of supply last year.

b) There is 9.57 weeks of supply this year.

Explanation:

a) For computing the weeks of supply last year, first we have to compute the average cost of goods sold which equals to

= Cost of goods sold ÷ Total Number of weeks in a year

= $7.55 million ÷ 52 weeks

= 0.145 million

We assume 52 weeks in a year.

Now, we can compute the week supply. The equation is shown below:

= Inventory ÷ Average cost of goods sold

= $1.52 million ÷ 0.145 million

= 10.48 weeks

Thus, there is 10.48 weeks of supply last year.

b) For computing the weeks of supply this year, first we have to compute the average cost of goods sold which equals to

= Cost of goods sold ÷ Total Number of weeks in a year

= $8.62 million ÷ 52 weeks

= 0.165 million

We assume 52 weeks in a year.

Now, we can compute the week supply. The equation is shown below:

= Inventory ÷ Average cost of goods sold

= $1.58 million ÷ 0.165 million

= 9.57 weeks

Thus, there is 9.57 weeks of supply this year.