Question

What percentage of cost of a Dell computer reflects inventory costs? Assume Dell’s yearly inventory cost is 40 percent to account for the cost of capital for financing the inventory, the warehouse space, and the the costs of obsolescence. In other words, Dell incurs a cost of $40 for a $100 component that is in the company’s inventory for one entire year. In 2001, Dell’s 10-k reports showed that the company had $400 million in inventory and COGS of $26,442 million.

Answer 1

Answer:

The percentage of cost of a dell computer reflects 0 .6051% inventory cost.

Explanation:

Assuming that the  Dell’s yearly inventory cost is 40 percent to account for the cost of capital for financing the inventory, the warehouse space, and the the costs of obsolescence. Given that , Dell incurs a cost of $40 for a $100 component that is in the company’s inventory for one entire year. In 2001, Dell’s 10-k reports showed that the company had $400 million in inventory and COGS of $26,442 million.

400 million inventory / 26,442 million COGS = .01513 years40% x .01513 years = .6051%

Therefore the percentage of cost of a dell computer reflects 0 .6051% inventory cost.