# Cachon Problems And Solutions Chapter 2

B. What—in absolute terms—is the per unit inventory cost for a product that costs $1,000?

Sales

$60,000,000

(Flow)

Inventory

$20,000,000

Part A

Selling Price

$2,000

COGS per Unit

$1,000

(Flow Rate)

Units Sold

30,000

Total COGS

$30,000,000

(Flow Rate)

Flow Time (in years)=Inventory/Flow rate

0.666667

Inventory Turns

1.5

Part B

Per-Unit Inventory Cost Percentage

16.66667

Per-Unit Inventory Cost (in $)

166.6667

Applying Little’s Law to Financials allows us to see how efficient organization is. In this particular problem we're concerned with the process so that the average inflow ( going into the process ) and the average outflow (coming out of the process). How long does it take for a dollar to get through the entire process how many dollars are sitting in inventory and how many dollars go through the entire process in a period of time

Q 2.6 (Highway) While driving home for the holidays, you can't seem to get Little's Law out of your mind. You note that your average speed of travel is about 60 miles per hour. Moreover, the traffic report from the WXPN traffic chopper states that there is an average of 24 cars going in your direction on a one-quarter mile part of the highway. What is the flow rate of the highway (going in your direction) in cars per hour?

Speed (in MPH)

60

Inventory...

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