The following figures are taken from the 2003 financial statements of McDonald\'

Question

The following figures are taken from the 2003 financial statements of McDonald's and Wendy's. Figures are in million dollars.

McDonalds Wendy's

Inventory $129.4 $54.4

Revenue 17140.5 3148.9

Cost of Goods Sold 11943.7 1634.6

Gross Profit 5196.8 1514.4

a. In 2003, what were McDonald's inventory turns? What were Wendy's turns?

b. Suppose it costs both McDonald's and Wendy's $3 (COGS) per their value meal offerings, each sold at the same price of $4. Assume that the cost of inventory for both companies is 30 percent a year. Approximately how much does McDonalds save in inventory cost per value meal compared to that of Wendy's? You may assume the inventory turns are independent of the price.

Explanation / Answer

a. Mcdonals's = $129.4

Wendy's = $54.4

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