# 2004 pev 2.1 past exam paper

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Help, anyone able to tell me how you get the stock turnover in this question and labour capacity and efficienty, really struggling trying to get to the answer.

thank you

• Registered Posts: 308 Dedicated contributor 🦉
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Had a cup of tea and now resolved the laour ratio's but still need help with stock turnover, information is:-
Sales 2750000
O stock 200000
cost of prod 2329600
c stock 240000
cost of sales 2289600

no desks sold 11000
no desks prod 11200

what is stock turnover in months, answer is 1.2 but how do you get this????
• Registered Posts: 17 New contributor 🐸
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stock turnover

closing stock / cost of sales x 12
240000/2289600 x 12 =1.25

i think, can't explain it though just seem to recall the ratio!
THE ABOVE ESTIMATES HOW LONG STOCKS WILL BE HELD BEFORE BEING SOLD NOT THE STOCK TURNOVER--SORRY
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Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered Posts: 308 Dedicated contributor 🦉
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My notes tell me cos/c stock x 12 and this is why I can not understand why it is 1.2
We have the cos of 2289600 and stock of 240000 as mentioned above but cant keep thinking it has something to do with no desks produced less sold - Is anitag right?
• Registered Posts: 308 Dedicated contributor 🦉
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Okay, just looked up stock turnover ratio which is what I said but stock turnover in days is the opposite way round, now I understand. Just need to remember this for 24 hrs!
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Now I'm confused can you explain it to me?was i right to begin with?
• Registered Posts: 308 Dedicated contributor 🦉
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Stock Turnover Ratio
To analyse stocks a little further it is possible to use ratio analysis. The STOCK TURNOVER RATIO shows how many times over the business has sold the value of its stocks during the year. It is calculated by:-

STOCK TURNOVER RATIO = Cost of goods sold
Stocks

The higher the stock turnover the better, because money is then tied up for less time in stocks. A quicker stock turnover also means that the firm gets to make its profit on the stock quicker, and so the firm should be more competitive. However, it will vary between industries and so it is important to compare within an industry.

It is also possible to express the ratio as a number of days, which is sometimes an easier way to understand it. To do this use the following formula:-

STOCK TURNOVER RATIO (in days) = Average Stocks
(Cost of goods sold/365)

The result of this ratio gives the "number of days that on average money is tied up in stocks". The longer this is, obviously the worse this is for the business as the money is not available to be used elsewhere. Since the stock is part of the working capital it is important that it is available for use promptly.
• Registered, Moderator Posts: 2,034 mod
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The question asks for: stock turnover in months

This is the data
Closing finished goods stock £240,000 £200,000
Cost of sales ...................£2,289,600 £2,400,000
So the periods should be: 1.25 months and 1 month
Sandy
sandy@sandyhood.com
www.sandyhood.com