Question

Mattress​ Wholesalers, Inc. is constantly trying to reduce inventory in its supply chain. Last​ year, cost of goods sold was ​$7.46 million and inventory was ​$1.51 million. This​ year, costs of goods sold is ​$8.59 million and inventory investment is ​$1.61 million. ​a) What was its weeks of supply last​ year? 10.53 weeks ​(round your response to two decimal​ places). ​b) What is its weeks of supply this​ year? 9.75 weeks ​(round your response to two decimal​ places). ​c) Is Mattress Wholesalers making progress in its inventory reduction​ effort? Since the number of weeks that cover the supply has decreased ​, Mattress Wholesalers is making progress in its​ inventory-reduction effort.

Answer 1

Answer:

(A)

we are given for last year

cost of goods sold was $7.5 million and inventory was $1.5 million

firstly , we will find average cost of sold good on week basis

=cost of goods / total number of weeks in a year

so, we get

average cost of sold good on week basis as :

=\frac{7.5}{52}= 0.1442 million

now, we can find weeks supply

Weeks supply=Investment in inventory/ Average cost of sold good on week basis

week supply = 1.5/0.1442 =10

so, week supply = 10 ...........Answer

(B)

we are given for this year

cost of goods sold is $8.6 million and inventory investment is $1.6 million

firstly , we will find average cost of sold good on week basis

=cost of goods / total number of weeks in a year

so, we get

average cost of sold good on week basis as :

=\frac{8.6}{52}= 0.1654 million

now, we can find weeks supply

Weeks supply=Investment in inventory/ Average cost of sold good on week basis

week supply = 1.6/0.1654 =10

so, week supply = 10 ...........Answer

(C)

yes , reduced by 7%