Question

The U.S. Airfilter company has hired you as a supply chain consultant. The company makes air filters for residential heating and air-conditioning systems. These filters are made in a single plant located in Louisville, Kentucky, in the United States. They are distributed to retailers through wholesale centers in 100 locations in the United States, Canada, and Europe. You have collected the following data relating to the value of inventory in the U.S. Airfilter supply chain: QUARTER 1 (JANUARY THROUGH MARCH) QUARTER 4 (OCTOBER THROUGH DECEMBER) QUARTER 2 QUARTER 3 (APRIL THROUGH (JULY JUNE) THROUGH SEPTEMBER) All amounts in millions of U.S. dollars 480 460 125 101 41 376 Sales (total quarter): United states Canada Europe Cost of goods sold (total quarter) Raw materials at the Louisville plant (end-of-quarter) Work-in-process and finished goods at the Louisville plant (end-of-quarter) Distribution center inventory (end-of-quarter): United states Canada Europe a. What is the average inventory turnover for the firm? (Round your answer to 3 decimal places.) Average inventory turnover b. If you were given the assignment to increase inventory turnover, what would you focus on? Reduce the amount of inventory or increase sales or both Increase the amount of inventory or increase sales or both Reduce the amount of inventory or reduce sales or both c. The company reported that it used $500M worth of raw material during the year. On average, how many weeks of supply of raw material are on hand at the factory? (Round your answer to 2 decimal places.) Weeks of raw material supply

Answer 1

A.

Cost of goods sold =417+446+432+352=$1,657

Average aggregate inventory value = (Quarter 1+ Quarter 2+ quarter 3+ quarter 4)/4

= ({67+108+60+15+6)+(44+121+39+17+7)+(82+141+46+16+10)+(83+191+58+26+7)/4

=(256+228+295+365)/4

=286

Average Inventory turnover = 1,657/286

=5.79

B.

It can be increased by Reduce the amount of inventory or increase sales or both

C.

Average raw materials inventory = 276/4 =69

Week supply of raw material =69/500 ×52 =7.17 weeks

____×____

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