pev help

lynn26

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

SandyHood

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?

lynn26

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

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?