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Category > Accounting Posted 20 Aug 2017 My Price 12.00

Hewlett-Packard Development Company,

CP 6-4  Inventory ratios for Dell and HP

Dell Inc. and Hewlett-Packard Development Company, L.P. (HP) are both manufacturers of computer equipment and peripherals. However, the two companies follow two different strategies. Dell follows primarily a build-to-order strategy, where the consumer orders the computer from a Web page. The order is then manufactured and shipped to the customer

 

 

within days of the order. In contrast, HP follows a build-to-stock strategy, where the computer is first built for inventory, then sold from inventory to retailers, such as Best Buy. The two strategies can be seen in the difference between the inventory turnover and number of days’ sales in inventory ratios for the two companies. The following financial statement information is provided for Dell and HP for a recent fiscal year (in millions):

 

 

Dell

HP

inventory, beginning of period

$ 1,301

$  7,490

inventory, end of period

1,404

6,317

Cost of goods sold

48,260

92,385

a.     Determine the inventory turnover ratio and the number of days’ sales in inventory ratio for each company. Use 365 days and round to one decimal place.

b.     Interpret the difference between the ratios for the two companies.

 

Answers

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Status NEW Posted 20 Aug 2017 06:08 PM My Price 12.00

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