The McDonald’s fast-food restaurant on campus sells an average of 7,200 quarter-

Question

The McDonald’s fast-food restaurant on campus sells an average of 7,200 quarter-pound hamburgers each week. Hamburger patties are resupplied twice a week, and on average the store has 795 pounds of hamburger in stock. Assume that the hamburger patties cost $4 a pound and there are 52 weeks in a year.

a. What is the inventory turnover for the hamburger patties? (Round your answer to 2 decimal places.)

Inventory turnover .......... per year

b. On average, how many days of supply are on hand? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Average days of supply ???

Explanation / Answer

Answer to question a :

Weekly sales of MCdonald’s restaurant = 7200 quarter pound Hamburger

Number of supplies in a week = 2

Hence order quantity = 7200 / 2 = 3600

Therefore, average running inventory ( which reduces steadily from 3600 to 0 and gets replenished again) = 3600 / 2 = 1800

Safety stock of Hamburger = 795 Pounds

Hence , total inventory = Running stock + safety stock = 1800 + 795 = 2595

Annual demand for Hamburger patties = 7200 / week x 52 weeks = 374400 patties

Hence,

Inventory Turnover of Hamburger Patties = 374400/ 2595 = 144.28 ( rounded to 2 decimal places )

INVENTORY TURNOVER = 144.28 PER YEAR

Answer to question b :

Number of days supply in hand

= 365 days/ Inventory turnover

= 365/ 144.28

= 2.53 ( rounded to 2 decimal places )

2.53 DAYS OF SUPPLY ARE IN HAND

INVENTORY TURNOVER = 144.28 PER YEAR

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