Identify the better performer between Best Buy and Dollar General. Calculate how much inventory the lower performer would have to reduce to match the Days on Hand/Inventory Turnover Ratio of the better performer and calculate the annual savings using the same 25% carrying or holding cost as in Part 1
Identify the better performer between Best Buy and Dollar General. Calculate how much inventory the lower performer would have to reduce to match the Days on Hand/Inventory Turnover Ratio of the better performer and calculate the annual savings using the same 25% carrying or holding cost as in Part 1
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Using the information you calculated in How much Part 1 add a Days on Hand calculation to Dollar General and Best Buy in addition to Inventory Turnover. Identify the better performer between Best Buy and Dollar General. Calculate how much inventory the lower performer would have to reduce to match the Days on Hand/Inventory Turnover Ratio of the better performer and calculate the annual savings using the same 25% carrying or holding cost as in Part 1. Include all calculations, your choice of the better performer, and a brief description of how you calculated the new inventory.
here is how much part one
| Company | COGS ( Cost of Inventory for the entire year) | Current Inventory Value | Inventory carrying cost based on 25% | Inventory Turnover Ratio |
| Best Buy( 2020) | 33,662,000,000 | 5,174,000,000 | 1293500000 | 6.505991496 |
| Dollar General (2020) | 19,264,912,000 | 4,676,848,000 | 1169212000 | 4.119208493 |
| Target(2020) | 57,221,000,000 | 8,992,000,000 | 2248000000 |
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