Past paper dec 2008

nosaj

Can someone assist me in calculating the stock turnover in section 2

SandyHood

(vii) raw materials stock turnover in days

Closing stock of raw material x 365
Raw material cost within the cost of sales

Stock of material (glass) 60,000 x 365...... 60,000 x 365
Direct materials (glass) .540,000............. 300,000
......

nosaj

thanks sandy could you please explain why the direct materials was used i was using the cost of sales 786000

SandyHood

This might seem a very teachery response, so sorry in advance, but look at what the question asked for.

(vii) raw materials stock turnover in days

When you value your raw materials, what went into the cost?
Does the stock of raw materials have costs that we incur after it has gone into production?

Finished goods stocks have cost us: raw material, labour and the overheads incurred.
Raw materials have cost us: only the raw materials

nosaj

thanks for your help, now I now the tricks to these question.

jilt

The BPP book says average stock/cost of sales x 365

but if no opening stock figure given then use the closing stock figure so

closing stock/cost of sales x 365

Which is correct avearge stock or closing stock? I'm getting confused

SandyHood

Both are fine
But try not to "learn" these measures of performance
They should be telling you something you can use to help the management.

Ave stock tells you the average period that stock was held prior to sale
Cost of Sales

Closing stock tells you the same, but it gives you more of an idea of how long the closing stock will last before it runs out
Cost of sales