There are two companies manufacturing drones. Company A manufactures mass market drones, while company B manufactures customised drones according to customers’ requirements. In 2020, company A produces 3,200 drones, 3% of which were found to be defective and cannot pass the quality check. Company A employs 5 workers working an average of 8 hours a day in the drone production, and they worked 200 working days in 2020.
Customary Pricing
There are various types of pricing strategies followed in the market. They are psychological pricing, odd pricing, free onboard pricing, customary pricing, prestige pricing, dual pricing, ruling pricing, negotiated pricing, mark up pricing, etc. each one can be explained as follows:
Multiple Unit Pricing
“Multiple-unit pricing is a practice where a company offers consumers a lower than unit price if a specified number of units are purchased.”
There are two companies manufacturing drones. Company A manufactures mass market drones, while company B manufactures customised drones according to customers’ requirements. In 2020, company A produces 3,200 drones, 3% of which were found to be defective and cannot pass the quality check. Company A employs 5 workers working an average of 8 hours a day in the drone production, and they worked 200 working days in 2020.
In contrast, company B produces 900 drones, 10% of which were found to be defective and cannot pass the quality check. Company B employs 3 workers working an average of 6 hours a day in the drone production, and they worked 170 days in 2020.
You are provided the following information:
| Company A | Company B | |
| Cost of goods sold | $1,870,000 | $1,080,000 |
| Inventory | ||
| Raw Material | $120,000 | $96,000 |
| Work-in-process | $50,000 | $12,000 |
| Finished goods | $150,000 | $20,000 |
Use the information provided in the above table and calculate the inventory turnovers of companies A and B separately. Is it reasonable to compare the inventory turnovers and reach a conclusion that one company’s inventory performance is better than the other’s? Why or why not?
Hi, may I request for an original answer and a more detailed explanation on this? Thank you so much for your help.
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