Budgeting help (2)

Hoamai

I am struggling with the question 2.1.c osborne book:

the budget was set at £319770, this assumed a 2% price increase from the previous year together with a reduction in production volume of 5%.
However production volume remains static and the price increase is 3%. Calculate the raw material cos forecast. The answer is £339900

I would appreciate if you guys can show me how to work out the answer. Thank you.

Nps

First you need to find last years actual cost.

The question tells you that £319,770 is 102% of last years cost in relation to price, so 100% is £313,500 (319770/102*100). You also know that this new figure is 95% of last years cost in relation to production volume so 100% is £330,000 (313500/95*100). You could do these steps in either order.

You now know that last years actual costs were £330,000 so an increase of 3% of this gives you your answer of £339,900.

SandyHood

Nice one Nps1976
clearly stated