Inventory Analysis

Dell Inc. and Hewlett-Packard Company (HP) compete with each other in the personal computer market. Dell's primary strategy is to assemble computers to customer orders, rather than for inventory. Thus, for example, Dell will build and deliver a computer within four days of a customer entering an order on a Web page. Hewlett-Packard, on the other hand, builds some computers prior to receiving an order, then sells from this inventory once an order is received. Selected financial information for both companies from a recent years financial statements follows (in millions):

	Dell Inc.			Hewlett-Packard Company
Sales	$56,940			$120,357
Cost of goods sold	44,754			92,385
Inventory, beginning of period	1,382			6,317
Inventory, end of period	1,404			7,490

a. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. Round your calculations and answers to one decimal place. Assume 365 days a year.

	Dell		Hewlett-Packard
1. Inventory turnover
2. Number of days' sales in inventory		days		days

b. Dell has a much higher inventory turnover ratio than does HP. Likewise, Dell has a much smaller number of days' sales in inventory. These significant differences are a result of Dell's make-to-order strategy.