December 2004 PEV past paper

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:25AM in AAT student discussion
Hi all,

Just wondering if someone could help me.

In Section 2, task 2.1.

Question d, asks for the stock turnover in months. I thought the ratio for this was cost of sales/stock x 12. The answer they got was 2.2, but i can't seem to get this figure, which figures are they using.

Also,

Question g, asks for the labour capacity ratio. The ratio for this is actual hours worked/budgeted hours x 100. I got the right answer for factory b, but got 93.3% for factory a, rather than 107.1% as it says in the answer.

Its probably i have taken the wrong figures for the ratios, so any help would be much appreciated.

Thanks in advance.

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:December 2004 PEV past paper

    2.1 d is testing that you understand the information the ratio gives you. I would not be surprised to see similar questions this June.
    Do not rote learn your ratios and expect to apply them willy nilly.
    Stock value is based on material cost only, so any measure of stock turnover should look at the material purchase value and see how much of it is in the closing stock

    Factory A £120,000 closing stock out of £660,000 material purchases = 2.18 months

    Factory B £142,000 closing stock out of £784,000 material purchases = 2.17 months
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:December 2004 PEV past paper

    Hi,

    Thanks for the response, it makes sense now.

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:December 2004 PEV past paper

    i was of the understanding that stock turnover is based on cost of sales?

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:December 2004 PEV past paper

    Michelle
    You are right and I am sure you can find text book after text book that will confirm that you are right.

    BUT

    I am not a rote learning kind of teacher. I think you should try to visualise the business and then think about the ratios that would be appropriate. This is applying understanding rather than mere learning.

    Duo Ltd make and sell furniture to customers' orders in other words production is just in time. A customer places an order, then Duo make the product. So try to visualise the stock.
      It is the various materials needed to make the furniture.
      It is
    NOT furniture we have made but not sold yet. If it had been then the stock would have been valued at the cost of getting it there including labour and normal overhead.

    But stock is only made up of raw materials so any calculation of how long stock is held must only look at the raw materials.

    Just bear in mind the need to think in the context of the task rather than just applying the textbook ratio.

    sandy.hood@chichester.ac.uk
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:December 2004 PEV past paper

    Yes Sandy, thanks for that, i suppose it would need to be made clear in an exam type question otherwise there would not be enough information to make the assumptions.

    I think in the textbook I have (FTC) the practice qustions are not clear, therefore the assumption is that stock isnt JIT nor is it customer-specific.

    Thanks, you have taught me something new :)

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