Consider the inventory, sales, and COGS of Costco and Walmart: (units are $ Millions) Costco Walmart...
Consider the inventory, sales, and COGS of Costco and Walmart:
|
(units are $ Millions) |
Costco |
Walmart |
|
Inventories |
3,643 |
28,447 |
|
Sales (net) |
48,106 |
286,103 |
|
COGS |
41,651 |
215,493 |
a) How many days does a product stay in Costco’s inventory before it is sold? Assume stores operate 365 days per year.
b) Suppose Costco and Walmart carry the same household cleaner. How much lower is the inventory cost for this item at Costco than at Walmart (in terms of percentages) assuming that the companies source this item from the same wholesaler?
Homework Answers
(a) Days in inventory = Inventory cost / COGS = 3643/41651
Days in Inventory (Costco) = 0.0875 years = 31.92 days
(b) Inventory Cost =item cost*Days in inventory*holding cost rate
because item cost and holding cost rate are same, therefore, inventory cost is directly dependent on days of inventory
At Costco --- 0.0875
Days in Inventory (Walmart) = 28447/ 215493 = 0.132 years
At Walmart --- 0.132
Difference in %= (0.1320-0.0875)/0.1320 * 100 = 33.71%
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