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Question 266 - CSCP discussion

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A company that sells 60 units of product in a given year and has an average quantity on hand of 10 units. There are 360 selling days and 261 production days in the year. The company has on hand how many days of product inventory?

A.
0.16
Answers
A.
0.16
B.
0.23
Answers
B.
0.23
C.
43
Answers
C.
43
D.
60
Answers
D.
60
Suggested answer: C

Explanation:

To determine the days of product inventory on hand, use the formula: DaysofInventory=AverageInventoryDailyUsageDaysofInventory=DailyUsageAverageInventory

Given:

Average quantity on hand = 10 units

Annual sales = 60 units

Selling days in a year = 360 days

First, calculate the daily usage: DailyUsage=60units360days=0.1667units/dayDailyUsage=360days60units=0.1667units/day

Then, calculate the days of inventory: DaysofInventory=10units0.1667units/day60daysDaysofInventory=0.1667units/day10units60days

However, considering production days (261 days) is not relevant as the selling days (360 days) have already been used in the calculation.

Hence, the correct days of inventory based on daily usage calculation is approximately 60 days. To be more precise, using the given options: DaysofInventory=10units(60units/360days)=60daysDaysofInventory=(60units/360days)10units=60days

Vollmann, T.E., Berry, W.L., Whybark, D.C., & Jacobs, F.R. (2005). Manufacturing Planning and Control for Supply Chain Management. McGraw-Hill.

Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation. Pearson.

asked 16/09/2024
Kayode Omotosho
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