Price Increase Help!

Mollypod88

Hi All,

Could someone please explain the working for the following question. It's driving me mad!

This year’s budget was set a £302400. This assumed a 4% reduction in production volume and a 5% increase in material prices compared to last year.

However production volume is 6% lower than the previous year and there has been no price increase.

Answer: 282000


Thanks

Nps

Hi,

First you need to establish what last years figure was.

The question is telling you that £302400 is 4% less than last yr with regards to production and 5% more than last yr with regards to prices.

So 302400 is 96% of last yr (production), hence last year must have been 302400/96*100=315000.
We also know that this is 105% of last yr (prices) so last yearr must have been 31500/105*100=£300000 in total.

As production actually turned out to be 6% lower, and there was no price increase, this year is 300000/100*94=282000.