Question

Inventory Turnover and days' sales in inventory Kracker Corp., Foodstuff, Inc., and Winston Stores, Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory (in millions) information: Kracker Foodstuff Winston Corp. Inc. Stores Cost of merchandise sold $34,310.0 $33,215.0 $35,405.0 Inventory, beginning of year 1,993.7 2,042.0 1,498.7 Inventory, end of year 1,954.3 1,962.0 1,411.4 a. & b. Determine the inventory turnover and the number of days' sales in Inventory (use 365 days and round to the nearest day) for the three companies. Round all interim calculations to one decimal place. For days' sales in Inventory, round final answers to the nearest day, and for inventory turnover, round to one decimal place. Company names Inventory Turnover Days' Sales in Inventory Kracker days Foodstuff days Winston Stores days inventory c. The inventory turnover ratios and days' sales in inventory are for Kracker and Foodstuff. Winston Stores has a turnover and a days' sales in inventory than Kracker and Foodstuff. These results suggest that Kracker and Foodstuff are than Winston Stores in managing inventory efficient d. If Kracker had Winston Stores' days' sales in inventory, how much additional cash flow would have been generated from the smaller inventory relative to its actual average inventory position? Round interim calculations to one decimal place and your final answer to the nearest milion million Feedback Check My Work a. 1. Determine the average daily cost of the merchandise sold by dividing the cost of goods sold by 365. 2. Divide the average Inventory by the average daily cost of the merchandise sold. The average inventory is the total of the beginning and ending inventories dvided Previous

Answer 1

Calculation an & alb - = Inventory Turnover Cost of Avenage Goods sold Inventory - Kracker = 12.4 34310 (1993-7 + 1954.3). - = food Stuff 33215 6040 + 1962 16.6 = 12 Winston Stores 35405 (1498.7 +1411.4)/2 24.3 - Average - Beginning Inut Ending Inu Inventory a > Days sale in inventory Kracker 365 Inventory Turnover = 365 17.4 a 21 days food Stuff - 365 16.6 = 22 days 00ځمکن = 366 = السعال 16 Stores 24.3

Dato - The inventory turnover latio and days Sale in inventory are de latively similar or lood Stuff & Kracker winston store has a higher inventory turnovee and lowee days in sales inventory than Kracker & food stuff. These results Suggest that kracker & Foodstuff are less efficient than winston in managing inventory do so leps assume that Kracker's days sale in inventory are 15 days as winsto No. of days = 365 = Aug Inventory in inventory Inventory turnover cost of good souls Ilets assume aug Inventory as a Kracker's = x Day in inventory cost of goods sold /365 days 365 I 15 days = S (34310 / 365) - 15 days = x 94 - 15×94 = x X = 1410 If Kracker had Is days inventory Aug Inventory is 1410-

Actual Average inventory of Kracker (1993.7 + 1954-3) 2 1974 Actual Aug inv Assumed Aug ind Additional Cash Flow - = tess 197 y 1410 & 564 million Additional cash flow of $564 w ould have been generated if kracker had days inventory of 15 days.