Parts sales, excluding VOR and all external sales are
recorded at $1,923,361 with a total gross profit of $461,606.
Currently, True Stock Turn is 4 times per annum, and stock
is to be reduced to bring True Stock Turn up to 5 times
per annum. What will be the savings in the investment
in parts stock?
stock Turn excludes VOR and any purchases other than from
stock and it's also calculated from the cost of sales,
not the Turnover.(Turnover less Gross Profit will give
you the Cost of Sales).
$1,923,361 - $461,606 = $1,461,755
you have the Cost of Sales, True Stock Turn is said to
be 4 times, therefore divide the Cost of Sales by 4 to
get the Stock Value.
divided by 4 = $365,438
True Stock Turn is improved to 5, then the stock value
required would reduce:
$1,461,755 divided by 5 = $292,351
answer to the question is the value of the stock reducion:
$365,438 - $292,351 = $73,087
can find out more about the various different Stock Turns
and the industry benchmarks in The KPI Book Second Edition
Click me to discover more
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