Deciphering Financial Statements (3M: Minnesota Mining and Manufacturing Company)
The Minnesota Mining and Manufacturing Company (3M) gives the following description of its business:
3M’s business has developed from its research and technology in coating and bonding for coated abrasives, the company’s original product. Coating and bonding is the process of applying one material to another, such as abrasive granules to paper or cloth (coated abrasives), adhesives to a backing (pressure sensitive tapes), ceramic coating to granular mineral (roofing granules), glass beads to plastic backing (reflective sheeting), and low tack adhesives to paper (repositionable notes). Familiar 3M products include Scotch tape and the ubiquitous Post it notes. Inventory data from 3M’s 2004 10 K report are as follows (in millions of U.S. dollars):
|
|
2004 |
2003 |
|
Cost of goods sold |
$9,958 |
$9,285 |
|
Inventories: |
|
|
|
Finished goods |
$ 947 |
$ 921 |
|
Work in process |
614 |
596 |
|
Raw materials |
336 |
299 |
|
Total inventories |
$1,897 |
$1,816 |
1. Compute cost of goods manufactured for 2004.
2. Compute total manufacturing costs for 2004.
3. Compute number of days’ sales in inventory for 2004 (use average inventory).Make the calculation using:
(a) Total inventory
(b) Finished goods inventory
4. Of the two numbers you computed in (3), which is more meaningful? Explain.