McDonaldsInventory $128.40Revenue $17, 140.50COGS $ 11943,70Gross Profit $5,196.
ID: 403316 • Letter: M
Question
McDonaldsInventory $128.40Revenue $17, 140.50COGS $ 11943,70Gross Profit $5,196.80
Wendy'sInventory: $54.40Revenue: 3148.90COGS: 1634.60Gross Profit: 1514.40
A. What were McDOnalds inventory turns? What were wendy's Inventory Turns?
B. Suppose it costs both McDonalds 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. Approx. how much does McDOnald's save in inventory cost per value meal compared to that of Wendy's. yOu may assume the inventory turns are independent of prices.
Explanation / Answer
1. Inventory Turnover = Cost of Goods Sold/Average Inventory
For Mcdonald
Inventory Turnover = $11943.70/$128.40 = $93.019
For Wendy's
Inventory Turnover = $1634.60/$54.40 = $30.04
2.
McDonalds saves 0 as compared to Wendy's on inventory cost as both have 3*.3 = $0.9 for their inventory cost per value meal.
This is because McDonalds might be having low inventory cost but other expenses being higher than Wendy's leading to same COGS.