The following sales and stock plans are available for the months of August through January.

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Question

The following sales and stock plans are available for the months of August through January.

Month Sales BOM Stock EOM Stock

August $ 77,678 $ 144,987 $ 344,567

September 123,455 344,567 456,986

October 99,678 456,986 509,325

November 145,543 509,325 602,345

December 245,778 602,345 357,654

January 66,213 357,654 251,345

What is the stock to sales ration for August?

business accounting

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Answer 1

Answer #1

Stock to Sales Ratio = Value of Average Stock in hand of a period / Value of Sold stock in that period

For August month BOM stock is = $144,987 and EOM Stock is =$ 344,567

Average Stock= (144,987 + 344,567) /2 = 489,554/2 = 244,777

and Sales of the month is = $ 77,678

Stock to sales ratio = 244,777 / 77,678 = 3.151 or 3.151:1

Stock to sales ratio indicates how much stocking is done by the business in comparison to sales, It is continuosly reviewed by businesses to avoid overstocking.

(Instead of Average stock in cases this ratio may also be calculated by taking stock at the beginning/end but in this case as there is a good gap in BOM and EOM stock levels, so application of Average stock is more appropriate.)

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Answer 2

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The following sales and stock plans are available for the months of August through January.

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