# Budgeting help (2)

Hoamai
New MemberPosts:

**10**Registered
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.

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.

## Comments

782RegisteredThe 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.

2,034Registered, Moderatorclearly stated

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