Review the chapter’s opening feature highlighting Jeff Bezos and Whole Foods. Assume that the business consistently maintains an inventory level of $30,000, meaning that its average and ending inventory levels are the same. Also assume its annual cost of sales is $120,000. To cut costs, the business proposes to slash inventory to a constant level of $15,000 with no impact on cost of sales. The business plans to work with suppliers to get quicker deliveries and to order smaller quantities more often.

Required

1. Compute the company’s inventory turnover and its days’ sales in inventory under 

(a) Current conditions 

(b) Proposed conditions.

2. Evaluate and comment on the merits of the proposal given your analysis for part 1. Identify any concerns you might have about the proposal.