# ch11pp - of goods sold of \$24,000 What is the inventory...

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Practice Problems: Chapter 11, Supply-Chain Management Problem 1 : Determine the sales necessary to equal a dollar of savings on purchases for a company that has a net profit of 6% and spends 70% of its revenues on purchases. Problem 2 : Determine the sales necessary to equal a dollar of savings on purchases for a company that has a net profit of 8% and spends 40% of its revenues on purchases. Problem 3 Phil Carter, President of Carter Computer Components, Corp. has the option of shipping computer transformers from its Singapore plant via container ship or airfreight. The typical shipment has a value of \$75,000. A container ship takes 24 days and costs \$5,000; airfreight takes 1 day and costs \$8,000. Holding cost is estimated to be 40% in either case. How should shipments be made? Problem 4 Carol King is evaluating the inventory performance of Johnston Systems. A recent annual report (all figures in millions) indicates assets of \$16,000, inventory of \$1,000, and cost

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Unformatted text preview: of goods sold of \$24,000. What is the inventory turnover and what percent of assets are tied up in inventory? 1 ANSWERS Problem 1 : From Table 11.3, we see that this company would have to increase sales by approximately \$5.56 Problem 2 : From Table 11.3, we see that this company would have to increase sales by approximately \$2.94 Problem 3 : Cost via container ship: [24 * (.40* 75,000) 365 ]+ 5,000 = (24*82.19) + 5,000 =1,972.56 + 5,000 = \$6,972.56 Cost via airfreight: [1* (.40* 75,000) 365 ]+ 8,000 = (1*82.19) +8,000 = 82.19 + 8,000 = \$8,082.19 Therefore, use the container ship as it has a lower total cost. Problem 4 Cost of good sold / inventory investment = 24,000 / 1,000 = 24 (inventory turnover) Total inventory investment/ Total assets = 1,000 / 16,000 = .0625 = 6.25% (percent of assets in inventory) 2...
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ch11pp - of goods sold of \$24,000 What is the inventory...

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