Raw Materials stock turnover

Just revisiting june 2010 MAC paper

And confused by how to calculate the above any help would be great




  • A-Vic
    A-Vic Registered Posts: 6,970
    Budgeted sales in units 25,000
    Actual sales in units 23,000
    Total sales revenue 5,750,000
    Production costs
    Materials 3,680,000
    Labour 460,000
    Energy costs 120,000
    Other production costs 116,000
    Depreciation 500,000
    Total production costs 4,876,000
    Advertising costs 500,000
    Administration costs and interest paid 250,000
    Net profit 124,000
    Extracts from the balance sheets
    Stocks of raw materials 1,250,000
    Stocks of finished goods 900,000
    Total debt (borrowing) 1,250,000
    Net assets 2,650,000
  • Rinske
    Rinske Registered Posts: 2,453
    Stock of raw materials / materials x 365


    materials / stock of raw materials = ... to 1.

    Also see thread:

    Hope that helps!
  • A-Vic
    A-Vic Registered Posts: 6,970
    thanks rinske :)
  • Melt
    Melt Registered Posts: 23 Dedicated contributor 🌟 🐵 🌟
    Hi A-vic and Rinske,

    I'm confused now! My Kaplan book says Stock Holding Period is caluculated as
    Stocks/Cost of Sales x 365.

    I've been stuck on the question on the June '10 paper too because of this - do you know why there are 2 calculations and which one to use when?

  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034
    There are two main types of stock (three if you include work in progress)

    so it is natural that there will be diffferent ways of finding the number of days that the closing stock is worth.

    Raw materials have cost whatever the raw materials cost (why would you value the period of time you are holding the raw materials for using the cost of sales?)

    Cost of sales includes raw materials, labour costs, overhead absorbed: so it is useful for a calculation of the holding period of finished goods.

    Please try to think about what you are trying to measure. If you are treating these ratios as little more than aritmetic, then you are missing out on real understanding.
    [email protected]
  • Melt
    Melt Registered Posts: 23 Dedicated contributor 🌟 🐵 🌟
    Yep, silly mistake confusing materials and stock, thanks for your help Sandy. I find one of the hardest things about distance learning is not having someone to point out my blonde moments!
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