Champion Cooling Company remanufactures window air conditioners during the off-s
ID: 382220 • Letter: C
Question
Champion Cooling Company remanufactures window air conditioners during the off-season months for sales during the scorching months of June, July, and August in the Oklahoma City area. Their average inventory of air conditioners is shown in the following table. The company operates 50 weeks a year and has average weekly sales of $3,750 and expects to sell $185,000 worth of product in a year.
Unit Type
Avg. Inventory
Value of Each Unit
(at cost)
110 Volts
72
$250
18,000 BTU or smaller 220 Volts
106
$350
Larger than 18,000 BTU
58
$500
What is their average aggregate inventory value?
What is their total inventory (measured as weeks of supply)?
What is their inventory turnover?
Unit Type
Avg. Inventory
Value of Each Unit
(at cost)
110 Volts
72
$250
18,000 BTU or smaller 220 Volts
106
$350
Larger than 18,000 BTU
58
$500
Explanation / Answer
Answer:- Avg Aggregate Inventory Value= å( Units on Hand)( Value of Each Item )
Avg Aggregate Inventory Value= 72*$250 + 106*$350 + 58*$500= $84100
Answer:- Weeks of supply = (avg. Aggregate Inventory Value)/ (Weekly Sales)
Weeks of supply =84100/3750 =22.43 weeks = 23 weeks
Answer:- inventory turnover=Annual Sales / Avg Aggregate Inventory Value
inventory turnover= $185,000/$84100 =2.2
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