(Major U.S. Retailers) The following table shows financial data (year 2004) for Costco Wholesale and Wal-Mart, two major U.S. retailers.
Assume that both companies have an average annual holding cost rate of 30 percent (i.e., it costs both retailers $3 to hold an item that they procured for $10 for one entire year).
|
Costco ($ Millions) |
Walmart ($ Millions) |
| Inventories |
$3,643 |
$29,447 |
| Sales (net) |
$48,106 |
$286,103 |
| COGS |
$41,651 |
$215,493 |
a. How many days, on average, does a product stay in Costco's inventory before it is sold? Assume that stores are operated 365 days a year.
b. How much lower is, on average, the inventory cost for Costco compared to Wal-Mart of a household cleaner valued at $5 COGS? Assume that the unit cost of the household cleaner is the same for both companies and that the price and the inventory turns of an item are independent.