COS/Finished Goods Ratio

jewels.p
jewels.p Registered Posts: 1,774
in AAT Level 4 (Level 8 in Scotland)
Can someone explain this to me please

C.O.S = £6.08m
Finished Goods = £0.4m

The ratio required is COS to Finished Goods.

The industry performance figure to compare the answer to is 8.10

I got the 6.08/0.4 = 15.2

But the explanation in the answer says: "the company is turning over its finished goods inventories faster than the industry as a whole. It is holding approx 0.8 months compared with 1.48 months for the sector. Where do these figures come from when the figures are 15.2 and 8.10 respectively? :confused:

Comments

  • Rinske
    Rinske Registered Posts: 2,453
    They used the ratio in months:

    It's finished goods/ cost of sales x 12 (months instead of 365 days)

    They got to the industry average by calculating it based on the result:
    1/8.10 x 12 (months).
  • jewels.p
    jewels.p Registered Posts: 1,774
    Rinske wrote: »
    They used the ratio in months:

    It's finished goods/ cost of sales x 12 (months instead of 365 days)

    They got to the industry average by calculating it based on the result:
    1/8.10 x 12 (months).

    Are you sure you havent already passed DFS? You know FAR too much to be sitting this exam with us on Thursday?:sneaky2:
  • Rinske
    Rinske Registered Posts: 2,453
    jewels.p wrote: »
    Are you sure you havent already passed DFS? You know FAR too much to be sitting this exam with us on Thursday?:sneaky2:
    I'm sorry and yes I am absolutely sure.

    I just think it's silly that they give you a ratio and then use a different ratio (same but recalculated) to discuss the answer, so I hope they don't put tricky things like this in our exam!

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