pev help

lynn26
lynn26 Feels At HomeRegistered Posts: 42
Hi everyone can you please help with this qustion in the pev 2008 december paper it asks turnover of stock in days.in the osbourne book it says divide cost of sales by closing stock but have tried this and it dont work but if you divide stock of materials by direct materials you come up with the correct answers so im getting bit comfused.. what is the correct way



direct materials glass 540,000

stock of materials glass 60,000

cost of sales 786,000

Comments

  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    Lynn
    I have had a look at the wording of the question
    • 2.1 (a) (vii) raw materials stock turnover in days

    You must read the question AND then understand it.

    Two other things are given
    • Direct materials (glass) - and as the business makes solar panels, this is the raw material cost of production/sales
    • Stock of material (glass) - clearly identified separately from the stock of finished goods

    The question wants to know how many days the business hold the glass for.

    So (ignore text book solutions prepared for finished goods stock)

    Stock of materials (glass)
    x 365
    Direct materials (glass)

    = ..60,000 ......x 365
    ....540,000

    Do you make it 40.6 or 41 days?

    And can you apply the same approach to the SP3000?
    Sandy
    [email protected]
    www.sandyhood.com
  • lynn26
    lynn26 Feels At Home Registered Posts: 42
    pev help

    hi sandy

    thanks very much for your help yes i did get the answer 40.6 in days but only by messing about with the figures on the calculater because i had it in my head that you had to have cost of sales divide closing stock..
    once again thanks .......

    lynn
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    Can you see why cost of sales (made up of all the costs of the finished goods that we sold during the period) would be inappropriate for measuring the holding period of raw materials?
    Sandy
    [email protected]
    www.sandyhood.com
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