Assume Dell's annual inventory holding cost is 40% to account for the cost of capital for...

Assume Dell's annual inventory holding cost is 40% to account for the cost of capital for financing the inventory, the warehouse space, and the cost of obsolescence. In 2001, Dell's 10-K reports showed that the company had $400 million in inventory and COGS of $26,442 million.

a) What is the per-unit inventory cost of Dell?
b) What Dell has to pay for holding a laptop that is worth $1000 in cost value?

Solutions

Expert Solution

(a) Per unit inventory cost:

Here, we need to calculate inventory turns.

According to the data, COGS = $26,442 million

Inventory = $400 million

Annual inventory cost = 40% per year

So,

===============================================================

(b) Dell has to pay for holding a laptop that is worth $1000:

40% is the annual inventory cost to account for the cost of capital, which means Dell has to bear $40 for the component of $100.

If the cost is 1000, Dell has to pay 40% of 1000 = 0.40*1000 = $400

===============================================================

Hope the answer will help. Please comment if you find difficulties in understanding. If you find the answer helpful, please give a thumbs up.

keosha answered 11 months ago

Next > < Previous

Related Solutions

Identify the advantages, disadvantages, and cost of holding inventory

For product A, a firm has an annual holding cost that is 20% of the item...

For product A, a firm has an annual holding cost that is 20% of the item price, an ordering cost of $120 per order, and annual demand of 15,000 units. The product’s discount schedule is given in the following table. Order Size Price Per Unit 1 – 250 $30.00 251 – 500 $28.00 501 – 799 $26.00 800 or more $25.00 -Determine the most cost-effective ordering quantity -What is the total cost for the order quantity determined in 1). -Describe...

Assume the returns from holding an asset are normally distributed. Also assume the average annual return...

Assume the returns from holding an asset are normally distributed. Also assume the average annual return for holding the asset a period of time was 16.3 percent and the standard deviation of this asset for the period was 33.5 percent. What is the approximate probability that your money will double in value in a single year? (Do not round intermediate calculations and enter your answer as a percent rounded to 3 decimal places, e.g., 32.161.) What is the approximate probability...

What is the holding period return (Capital gain) of a 9% annual coupon bond with a...

What is the holding period return (Capital gain) of a 9% annual coupon bond with a face value of $1000 and with five years to maturity if it is purchased at the beginning of year 1 at a Yield-to-Maturity (market rate) of 6.0% and sold at the beginning of year 2? Assume that rates do not change. 7.4% 7.1% 6.8% 6.0%

QUESTION 1 Firms will likely pay less on inventory holding cost as their inventory turns decreases....

QUESTION 1 Firms will likely pay less on inventory holding cost as their inventory turns decreases. True False QUESTION 2 Firms with higher levels of perishable product, tend keep a higher Days-of-Supply to prepare for unexpected demand. True False QUESTION 3 While Tier 2 suppliers are not always vendors that a manufacturer would order directly from, it's important that they perform audits on these vendors. True False QUESTION 4 Decision-making in supply chain is very important because tactical and strategic...

A certain type of computer costs $1,000, and the annual holding cost is 25% of the...

A certain type of computer costs $1,000, and the annual holding cost is 25% of the value of the item. Annual demand is 10,000 units, and the order cost is $150 per order. (Assume 250 working days per year) ◦D = _______________ ◦S = _______________ ◦H = _______________ ◦Q* = ______________ ◦Total cost = ____________ ◦Expected number of orders per year =_______________ Expected time between orders =

Assume the returns from holding small-company stocks are normally distributed. Also assume the average annual return...

Assume the returns from holding small-company stocks are normally distributed. Also assume the average annual return for holding the small-company stocks for a period of time was 15.2 percent and the standard deviation of those stocks for the period was 33.1 percent. Use the NORMDIST function in Excel® to answer the following questions. What is the approximate probability that your money will double in value in a single year? (Do not round intermediate calculations and enter your answer as a...

Assume the returns from holding small-company stocks are normally distributed. Also assume the average annual return...

Assume the returns from holding small-company stocks are normally distributed. Also assume the average annual return for holding the small-company stocks for a period of time was 16.3 percent and the standard deviation of those stocks for the period was 34 percent. Use the NORMDIST function in Excel® to answer the following questions. What is the approximate probability that your money will double in value in a single year? (Do not round intermediate calculations and enter your answer as a...

Inventory holding cost are those associated with storing unsold inventory which may include storage costs, labour,...

Inventory holding cost are those associated with storing unsold inventory which may include storage costs, labour, equipment, and insurance incurred to manage the unsold goods and risk of loss due to obsolescence or pilferage. To manage inventory holding costs, questions on “What”, “Where”, “When”, “How much” and “How often” are often considered. Explain how these questions help manage inventory holding costs. You may cite an example to support your explanation.

Their price lists are shown in the table Ordering cost is $55, and annual holding cost per unit is $4

M.P. VanOyen Manufacturing has gone out on bid for a regulator component. Expected demand is 725 units per month. The item can be purchased from either Allen Manufacturing or Baker Manufacturing. Their price lists are shown in the table Ordering cost is $55, and annual holding cost per unit is $4 Allen Mfg.Baker Mfg.QuantityUnit PriceQuantityUnit Price1-499$16.00 1-399$16.10 500-99915.50400-79915.601000+15.00800+15.10a) What is the economic order quantity if price is not a consideration? b) Which supplier, based on all options with regard to discounts,...

Subjects