Question 25 (14 points) Macy\'s and JC Penney are two major department store cha

ID: 421543 • Letter: Q

Question

Question 25 (14 points) Macy's and JC Penney are two major department store chains. Given some selected indicators in 2017, we need to compare their retailing performance. Hypothetically, both chains carry the same gold necklace at a cost of $345. To answer this question, you only need to copy Part 2 and Part 3 onto your papers and follow the steps. Show your calculations together with the results Part 1- Indicators End of fiscal year (date) Net sales (millions of S) COGS (millions of S) Merchandise Inventories (millions of $) Annual inventory cost rate (assumed) Part 2-Inventory Turns (a)[2] Inventory duration (days, 3 decimals) Macy's JC Penney 02/03/2018 02/03/2018 24,837.00 12,506.00 15,152.00 8,174.00 5,178.00 2,762.00 30.00% JC Penney 30.00% Macy's (b)12] Inventory turns (turns per year, 3 decimals) Part 3- Inventory Costs Cost of a gold necklace ($) (c)[2] Per-unit inventory holding cost rate (96, 2 decimals) (d)[2] Inventory holding cost of the gold necklace ($, 2 decimals) (e)[1] Gross profit margin (96, 2 decimals) (f)[1] Expected selling price of the gold necklace ($, 2 decimals) (g)[2] Gross profit of the gold necklace ($, 2 decimals) Macy'sJC Penney 345.00 345.00 (h)2)] Immediate gross profit of the gold necklace ($, 2 decimals) ?

Explanation / Answer

Formula

Macy’s

JC Penney

(a)

Inventory duration

365/ Inventory turns

365/2.926 = 124.744

365/2.959 = 123.352

(b)

Inventory turns

COGS/Average inventory

15152/5178 = 2.926

8174/2762 = 2.959

(c)

Per-unit inventory holding cost rate

Inventory holding cost/ No. of units

(In dollars)

1553.4/ 43.919 = 35.37 M

828.6/ 23.693 = 34.97 M

In percent

(35.37/1553.40) x 100

= 2.28 %

(34.97/828.60) x 100

= 4.22 %

(d)

Inventory holding cost of the gold necklace

Inventories x Annual inventory cost rate

= 5178 x 0.3

= 1553.40 M

= 2762 x 0.3

= 828.60 M

(e)

Gross profit margin

Gross profit/net
sales
where gross profit = net sales - COGS

= (24837 -15152)/ 24837

=0.39 M

= (12506-8174)/ 12506

=0.35 M

(f)

Expected selling price of the gold necklace

Net sales/ No. of units
where no. of units = COGS/345

24837/ 43.919 = 565.52 M

12506/23.693 =

527.84 M

No. of units

15152/345 = 43.92 M

8174/345= 23.69 M

(g)

Gross profit of the gold necklace

Gross profit/ No. of units

(24837 -15152)/ 43.919 = 220.52 M

(12506-8174)/ 23.693 = 182.84 M

(h)

Immediate gross profit of the gold necklace

(Gross profit + inventory holding cost) / No. of units

(24837 -15152+1553.40)/ 43.92 = 255.88 M

(12506-8174+ 828.6)/ 23.69 = 217.84 M