CHAPTER 1A

Chapter 01A Solution Manual

CHAPTER 1A

Solution

1.

Sd = S/d

= 8028 / (13 weeks * 7 days)

= 88.22 M per day

ARd = AR/Sd

= 2689 / 88.22

= 30.48 days

Cd = Sd * (COS/S)

= 88.22 * (6580 / 8028)

= 72.31M

Id = I/Cd

= (126 + 224) / 72.31

= 4.84 days

APd = AP/Cd

= 4326 / 72.31

= 59.83 days

Cash to Cash Cycle Time = 30.48 + 4.84 59.83 = -24.51 days

3. Reduction in cost-of-goods sold. This should improve cash-to-cash cycle time. More frequent deliveries from suppliers. Improve cash-to-cash cycle time. Reductions in time customers are allowed to pay for goods. Improve cash-to-cash cycle time. Change from paying suppliers on receipt of goods to waiting 60 days to pay suppliers. This should improve cash-to-cash cycle time. Write-off of obsolete inventory. Improves cash-to-cash cycle time. Reduction in labor content in a production process. Improves cash-to-cash cycle time. Outsourcing the production of a major product. Improves cash-to-cash cycle time.

4.2300/60 = (38.33 hours) / 5 hours per student 8 part-time college students

5.(2100 x $2.00) (2300 x $1.25) = $1325.

(1500 x $2.00) (2300 x $1.25) = $125.

6.There would be no discarded sandwiches in either case, since the next day all could be sold. But it does require the sellers to use up the old inventory first. Ajax would need a linkage to each selling site to know how many less sandwiches to send each day (i.e., gross-to-net).

9.Monthly delivery savings = 3 x $20 = $60 ($720/year). Cost of capital tied up in customer inventories is about 1 to 3 weeks of stock (say 2 on average) =$200 x 15% = $30.

10.The master production schedule for assembling sandwiches could be used to determine the forward need (forecast) of peanut butter requirements. It could also be used for payments assuming the schedule is actually achieved. Another potential source of information for payments could be the actual build results perhaps coming from labor reporting in the HR systems. Additionally, there would probably be information in the sales units for shipments to the various outlets that could be used. If the payment was based on actual end item sandwich sales then it would be necessary to connect to the selling unit to the detailed sales analysis. A problem here is that the supplier should also be paid for sandwiches not sold. It would also be necessary to periodically reconcile the inventories in both companies.

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