PRAR Help

System

I recently came across a PRAR question and was wondering if any1 can elaborate it for me to understand a little.

Its based on index numbers and I am a bit baffled by it as when I asked another lecturer about it, I was still quite confused.


If I was to calculate the indexed value of the monthly sales in a certain month how should this be done?


I have boxes to fill in for....

Unadjusted Total

Index Factor

Index Totals



It also mentions that I have to inflate the earlier months sales, what does that mean?

Hope its not too much trouble.



thanks

Anthony

System

Re:PRAR Help

By indexing the sales you are effectively inflating the sales to show what they would have been worth at a later date. For example last december my sales were £200,000. The RPI then was 126.7, it is now 135.4. To index these sales to todays prices I multiply the sales by the current period index and divide by the earlier period index. To use your boxes:

Unadjusted total: £200,000
Index Factor: 135.4 / 126.7
Index totals: £213,733 (to nearest £)

I can thus see whther or not I am actually doing better or worse now. If my sales this month are only £210,000 then I am doing less well than in December in real terms.

Hope this makes sense

Graham Blott

System

Re:PRAR Help

Hey there Graham thanks for the reply. In the question sheet supplied the column with the index factors mentions that there is an "industrial base index = 100".

Would that make any difference to the example you have given?

Would is still be:

Index Factor: 135.4 / 126.7

as per your example and end up with the same index total figure?

System

Re:PRAR Help

Yes. All indexes have a base period - which is always given the value 100. Unless you are indexing back to that base period, the 100 is irrelevant.