Refer to Appendix 1. Calculate the inventory turnover ratio.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2021). The mark or mark type is shown in brackets.

1. [4] (a) Correct answer with or without units. Working not required. Allow accurate rounding. 12.5 times / 29.2 days
2. [3] (a) Statement of correct calculation of inventory turnover. 10 / 0.8 OR 0.8 / 10 × 365
3. [2] (a) Correct calculation of inventory $0.8m
4. [3] (a) OR OFR based on error in calculating inventory and statement of correct formula e.g. 10 / 0.6 = 16.67
5. [1] (a) Correct calculation of inventories Inventory = 1.4 – 0.6 / OR Correct formula for inventory turnover
6. [0] (a) No creditable content
7. [Relevant formulae] (a) Inventory turnover = cost of sales / value of inventories (1 if no relevant calculation)
8. [Relevant formulae] (a) Inventory turnover (days) = value of inventories / (cost of sales / 365) / OR average value of inventory / cost of sales × 365
9. [Knowledge] (b) Definition of lean production: reducing all forms of waste.
10. [Knowledge] (b) Lean production techniques TQM Quality circles Cell production JIT
11. [Knowledge] (b) Knowledge of relevant ratios such as inventory turnover
12. [Application] (b) Inventory turnover of 12.5. Inventory currently held for approximately 1 month (29.2 days).
13. [Application] (b) High levels of stocks of finished products to ensure demand is met.
14. [Application] (b) Problems of forecasting demand that BFB has faced.
15. [Application] (b) Many components from around the world – complex supply chain.
16. [Application] (b) Limited experience of operations manager.
17. [Application] (b) Shift of production to new factory.
18. [Analysis] (b) By reducing all forms of waste BFB will be more efficient and this will reduce unit cost of production making BFB more competitive.
19. [Analysis] (b) Giving workers responsibility for quality may increase motivation, improve quality and productivity making BFB more competitive.
20. [Analysis] (b) Training costs will be required thus increasing costs of BFB.
21. [Analysis] (b) Complex supply chain with components from around the world will make JIT production difficult to implement. Lead times may be long.
22. [Evaluation] (b) Elements that the evaluation/judgement might depend on: Effectiveness will depend on supplier relationships and reliability of receiving supplies when needed. Given significant transport distances this may be difficult due to long lead times. BFB hasn't been able to predict demand accurately. Thus, JIT risks lost customers if demand is underestimated. Is inventory turnover high or low compared to competitors?
23. [Evaluation] (b) Significance of other factors that may also impact success of LP: New factory, new workers so no ingrained culture to overcome.
24. [Evaluation] (b) Supported overall judgement about introduction of LP.