Question

EBI Solar uses a high-tech process to turn silicon wafers into tiny solar panels. These efficient and inexpensive panels are used to power low-energy hand-held electronic devices. Last year, EBl Solar turned their inventory 3.7 times and had a cost of goods sold of $2.8 million. Assume 52 business weeks per year.
a. Express last years average inventory in weeks of supply.
b. After several supply chain improvement initiatives, inventory investment has dropped across all inventory categories. While EBl's cost of goods sold is not expected to change from last year's level, the value of raw materials has dropped to $95,000; work-in-process to $26,000; and finished goods to $15,800. Assuming 52 business weeks per year, express EBl's current total inventory level in weeks of supply and inventory turns.

Answer 1

Answer:

EBI Solar

a. Weeks of supply = 14.05 weeks

b. Inventory turnover = 20.5x

Weeks of supply = 2.5 weeks

Explanation:

a) Data and Calculations:

Inventory turnover = 3.7 x

Cost of goods sold = $2.8 million

Average inventory = $756,757 ($2,800,000/3.7)

Current value of inventory:

Raw materials = $95,000

Work-in-process  26,000

Finished goods    15,800

Total =              $136,800

a. Weeks of supply = 14.05 weeks (52/3.7)

b. Inventory turnover = 20.5x ($2,800,000/$136,800)

Weeks of supply = 2.5 weeks (52/20.5)