management accounting problem index numbers

lgarside

Can anyone help with the below please

Year Turnover RPI
1992 33.7 139.2
1993 37.2 141.9
1996 44.1 155.1

To convert the 1992 figure into 1996 I would do 155.1/139.2 x 33.7 to give 37.55

However my notes say to rebase can someone show me how to do this, what the correct answer should be and let me know if the way I worked it out is wrong or if the rebasing method just gives a more accurate answer.

SandyHood

Your technique is fine but your comments suggest that you know what sums to do without understanding the approach and its purpose.

By dividing the 33.7 by the RPI for the year you are finding the turnover value at the base year prices. (Base year =100)

By multiplying that answer by the 1996 index you are finding the turnover at the 1996 index.

Rebasing the index would mean converting 1992 to the base year (=100). If so the 155.1 for 1996 would need adjusting relative to the new base. So divide 155.1 by 139.2.
This gives you a new index where
........Year........Turnover............RPI........
........1992........33.7................100
........1996........44.1................111 (to rounded value)

Using the unrounded index gets your answer
using the rounded figure gets 37.4