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Sales
Inventory
$60,000,000
$20,000,000
Part A
Selling Price
COGS per Unit
$2,000
$1,000
Units Sold
Total COGS
30,000
$30,000,000
(Flow)
(Flow
Rate)
(Flow
Rate)
0.666667
1.5
Part B
Per-Unit Inventory Cost
Percentage
Per-Unit Inventory Cost (in $)
16.66667
166.6667
In this particular problem we're concerned with the process so that the
average inflow ( going into the process ) and the average outflow (coming
out of the process). How long does it take for a dollar to get through the
entire process how many dollars are sitting in inventory and how many
dollars go through the entire process in a period of time
Q 2.6 (Highway) While driving home for the holidays, you can't
seem to get Little's Law out of your mind. You note that your
average speed of travel is about 60 miles per hour. Moreover, the
traffic report from the WXPN traffic chopper states that there is an
average of 24 cars going in your direction on a one-quarter mile
part of the highway. What is the flow rate of the highway (going
in your direction) in cars per hour?
60
24
0.00416
7
5760
96
highway)
There are 24 cars on of a mile, i.e. there are 96 cars on the 1 mile
stretch(inventory).
Inventory= Flow Rate * Flow Time: 96 cars=Flow Rate * 1 minute Thus, the
Flow Rate is 96 cars per minute, corresponding to 96*60=5760 cars
per hour.
3643
3
Wal-Mart
29447
48106
41651
286103
215493
31.92468
49.87705
2.623947
4.099484
0.131197
0.204974
0.073777
Q2.10 (McDonald's) The following figures are taken from the 2003
1
financial statements of McDonald's and Wendy's. Figures are in
million dollars.
a.
b.
Inventory
Revenue
McDonald's
129.4
17140.5
Wendy's
54.4
3148.9
11943.7
5196.8
1634.6
1514.4
0.01083416
92.3006182
0.03328
30.04779
Part B
Per-Unit Inventory Cost
0.32502491
Percentage
Per-Unit Inventory Cost (in
0.00975075
$)
Difference between Wendy's and McDonald's inventory cost per
value meal (in $):
0.998409
0.029952
0.0202
02
Inventory turns for McDonalds were 92.3. They were 30.05 for
Wendys.