Andy's Auto Dealership (AAD) is a family-run auto dealership selling both new and used vehicles. In an average month, AAD sells a total of 160 vehicles. New vehicles represent 60 percent of sales, and used vehicles represent 40 percent of sales. Max has recently taken over the business from his father. His father always emphasized the importance of carefully managing the dealership's inventory. Inventory financing was a significant expense for AAD. Max's father consequently taught him to keep inventory turns as high as possible. Examining the dealership's performance over recent years, Max discovered that AAD had been turning its inventory (including both new and used vehicles) at a rate of 8 times per year. What is AAD's average inventory (including both new and used vehicles)? • Drilling down into the numbers, Max has determined that the dealerships new and used businesses appear to behave differently. He has determined that turns of new vehicles are 7.2 per year, while turns of used vehicles are 9.6 per year. Holding a new vehicle in inventory for a month costs AAD roughly $175. Holding the average used vehicle in inventory for a month costs roughly $145. What are AAD's average monthly financing costs per vehicle? • A consulting firm has suggested that AAD subscribe to its monthly market analysis service. They claim that their program will allow AAD to maintain its current sales rate of new cars while reducing the amount of time a new car sits in inventory before being sold by 20 percent. Assuming the consulting firm's claim is true, how much should Max be willing to pay for the service?
Andy's Auto Dealership (AAD) is a family-run auto dealership selling both new and used vehicles. In an average month, AAD sells a total of 160 vehicles. New vehicles represent 60 percent of sales, and used vehicles represent 40 percent of sales. Max has recently taken over the business from his father. His father always emphasized the importance of carefully managing the dealership's inventory. Inventory financing was a significant expense for AAD. Max's father consequently taught him to keep inventory turns as high as possible. Examining the dealership's performance over recent years, Max discovered that AAD had been turning its inventory (including both new and used vehicles) at a rate of 8 times per year. What is AAD's average inventory (including both new and used vehicles)? • Drilling down into the numbers, Max has determined that the dealerships new and used businesses appear to behave differently. He has determined that turns of new vehicles are 7.2 per year, while turns of used vehicles are 9.6 per year. Holding a new vehicle in inventory for a month costs AAD roughly $175. Holding the average used vehicle in inventory for a month costs roughly $145. What are AAD's average monthly financing costs per vehicle? • A consulting firm has suggested that AAD subscribe to its monthly market analysis service. They claim that their program will allow AAD to maintain its current sales rate of new cars while reducing the amount of time a new car sits in inventory before being sold by 20 percent. Assuming the consulting firm's claim is true, how much should Max be willing to pay for the service?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Transcribed Image Text:Andy's Auto Dealership (AAD) is a family-run auto dealership selling both new and used
vehicles. In an average month, AAD sells a total of 160 vehicles. New vehicles
represent 60 percent of sales, and used vehicles represent 40 percent of sales. Max
has recently taken over the business from his father. His father always emphasized the
importance of carefully managing the dealership's inventory. Inventory financing was a
significant expense for AAD. Max's father consequently taught him to keep inventory
turns as high as possible.
Examining the dealership's performance over recent years, Max discovered that
AAD had been turning its inventory (including both new and used vehicles) at a
rate of 8 times per year. What is AAD's average inventory (including both new
and used vehicles)?
Drilling down into the numbers, Max has determined that the dealerships new
and used businesses appear to behave differently. He has determined that turns
of new vehicles are 7.2 per year, while turns of used vehicles are 9.6 per year.
Holding a new vehicle in inventory for a month costs AAD roughly $175. Holding
the average used vehicle in inventory for a month costs roughly $145. What are
AAD's average monthly financing costs per vehicle?
• A consulting firm has suggested that AAD subscribe to its monthly market
analysis service. They claim that their program will allow AAD to maintain its
current sales rate of new cars while reducing the amount of time a new car sits in
inventory before being sold by 20 percent. Assuming the consulting firm's claim
is true, how much should Max be willing to pay for the service?
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