Question: Charlie’s Cycles Inc. has $90 million in sales

Get premium Solution to all your Homework Assignments exclusively on writerkingdom. We have CFA/MBA writers to provide model answers to your every academic problem

Compare

Description

Question:
Charlie’s Cycles Inc. has $90 million in sales. The company expects that its sales will increase 8% this year. Charlie’s CFO uses a simple linear regression to forecast the company’s inventory level for a given level of projected sales. On the basis of recent history, the estimated relationship between inventories and sales (in millions of dollars) is as follows:

Inventories = 6 + 0.1410(Sales)

a. Given the estimated sales forecast and the estimated relationship between inventories and sales, what are your forecasts of the company’s year-end inventory level? Enter your answer in millions. For example, an answer of $25,000,000 should be entered as 25. Round your answer to two decimal places.
$  ________ million?

b. What are your forecasts of the company’s year-end inventory turnover ratio? Do not round intermediate calculations. Round your answer to two decimal places.

________?

Answer:

a). Solution:-

Expected sales during the year = 90 Million + 8 % of 90 Million

= 90 Million + 7.2 Million

= $ 97.20 Million

Year-end inventory level = 6 + 0.1410 * 97.20

= 6 + 13.7052

= $ 19.7052 Million. (Rounded off to $ 19.71 million approx.)

Conclusion:- Forecasted year end inventory level of company = $ 19.71 million (approx).

b). Solution:-

inventory level of company at the beginning of year = 6 + 0.1410 * 90

= 6 + 12.69

= $ 18.69 Million.

Average inventory of company = (18.69 + 19.71) / 2

= 38.40 / 2

= $ 19.20 Million.

Inventory turnover ratio = Sales / Average inventory.

= 90 million / 19.20 million

= 4.69 times (approx)

Conclusion:- inventory turnover ratio of company = 4.69 Times (approx).

 

Reviews

There are no reviews yet.

Be the first to review “Question: Charlie’s Cycles Inc. has $90 million in sales”

Your email address will not be published. Required fields are marked *