CHAPTER 1A
Solution
1.
Sd = S/d
ARd = AR/Sd
Cd = Sd * (COS/S)
Id = I/Cd
APd = AP/Cd
= 8028 / (13 weeks * 7 days)
= 2689 / 88.22
= 88.22 * (6580 / 8028)
= (126 + 224) / 72.31
= 4326 / 72.31
= 88.22 M per day
= 30.48 days
= 72.31M
= 4.84 days
= 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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