What-?in absolute terms-?is the per unit inventory cost for a product that costs $1,000? Sales (Flow) Inventory Part A Selling Price 52000 COGS per Unit SSL,oho (Flow Rate) Units Sold 30,000 Total COGS Flow Time (in rate 0. 666667 Inventory Turns Part B Per-Unit Inventory Cost Percentage 16. 66667 Per-unit Inventory Cost (in $) 166. 6667 Applying Littlest Law to Financial allows us to see how efficient organization is. In this particular problem we’re concerned with the process so that the average inflow ( going into the process ) and the average outflows (coming out of the recess).
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 Littlest 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 WISP 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? Speed (in MPH) Flow time for 1/4-mile stretch of highway (in hrs) 0. 004167 Throughput (in cars per hour on highway) 5760 Throughput (in cars per minute on highway) This problem represents is an application of Little?s Law to transportation science. We look at 1 mile of highway as our process. Since the speed is 60 miles per hour, it takes a car I minute to travel through the process (flow time). There are 24 cars on off mile, i. E. There are 96 cars on the 1 mile stretch(inventory).
Inventory= Flow Rate * How Time: 96 cars=FWIW’ Rate * I minute Thus, the Flow Rate is 96 cars per minute, corresponding to cars per hour. SQ. G (Major LLC. S. Retailers) The following table shows financial data (year 2004) for Cost Wholesale and Wall-Mart, two major U. S. Retailers. Assume that both companies have an average annual holding cost rate of percent (i. E. , it costs both retailers $3 to hold an item that they procured for $10 for one entire year). A. How many days, on average, does a product stay in Cost’s inventory before it is sold?
Assume that stores are operated 365 days a year. B. How much lower is, on average, the inventory cost for Cost compared to Wall-Mart of a household cleaner valued at COGS? Assume that the unit cost to the household cleaner is the same tort both companies and that the price and the inventory turns of an item are independent, Cost Wall-Mart Inventories (SUM) gauge Sales (net $MM) 48106 286103 COGS (b,elm) (Plow Rate) 41651 215493 Flow Time (in days) 31. 92468 49. 87705 part B Per-unit Inventory Cost Percentage 2. 623947 4. 099484
Per-Unit Inventory Cost (in f) 0. 131 197 0. 204974 Difference between inventory cost for $5 COGS item for the two companies: 0. 073777 This problem is another example of Applying Littlest Law to Financial factors. In this case Littlest law enables us to compare the efficiency of two organizations. Also, this problem illustrates how one product behaves differently (in terms of costs) in each company. SQ. 10 (McDonald’s) The following figures are taken from the 2003 financial statements of McDonald’s and Wend’s,l Hugger are in million dollars. A.