EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Question
Chapter 12, Problem 3PA
Summary Introduction
Interpretation: Inventory days’ supply needs to be calculated based on the given information.
Concept Introduction: Inventory day’s supply is the ratio of average inventory level and cost of goods sold per day.
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Andrew Manufacturing held an average inventory of $1.5 million (raw materials, work-in-process, finished goods) last year. Its sales were $8.5 million, and its cost of goods sold was $6.2 million. The firm operates 290 days a year. What is the inventory days’ supply? What target inventory level is necessary to reach a 15- and 10-day inventory days supply during the next two years?
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