Sample assessment query for budgeting, level 4
Jayney
Registered Posts: 21 New contributor 🐸
I'm sure I must have covered this but obviously missing the point  It is online assessment 2 for budgeting, Task 4.
I need to calculate the sales price index to calculate sales revenue for years 1 to 5 prices & need to project the sales revenue year 1 prices forward to year 5 & calculate the year 5 sales revenue forecast.
Yr 1 Yr 2 yr 3 yr 4 yr5
Sales Revenue 12,200 12,747 13527 14091 14891
Sales price index 110.0 114.0 120.0 124.0 130.0
Sales revenue at yr 1 price ? ?
If anyone could show me what to do please. Many thanks
I need to calculate the sales price index to calculate sales revenue for years 1 to 5 prices & need to project the sales revenue year 1 prices forward to year 5 & calculate the year 5 sales revenue forecast.
Yr 1 Yr 2 yr 3 yr 4 yr5
Sales Revenue 12,200 12,747 13527 14091 14891
Sales price index 110.0 114.0 120.0 124.0 130.0
Sales revenue at yr 1 price ? ?
If anyone could show me what to do please. Many thanks
0
Comments

Dear Jayney
Here is a word doc of a spreadsheet I produced using your figures
The general approach to removing inflation from a set of figures is to divide each sales revenue value by the price index for that year (e.g. year 2 £12,747/114)
If you have then been asked to put all of the values into the value at year 1 prices you multiply your answer by the year 1 index
So the year 2 sales revenue at year 1 prices is found by :
Year 2 Sales Revenue x Year 1 Sales price index =
Year 2 Sales price index
£12,747 x 110 = £12,299.74
im114
I didn't follow the year 5 forecast as you already have that value.
But I can see that the actual question does not give you the £14,891 value
The way to derive it is to use the values you have for the year 1 prices: Find the rate of growth on a yearly basis  here the annual increase (at year 1 prices is £100)
 Add £100 onto the year 4 sales revenue at year 1 prices  this gives you the year 5 sales revenue at year 1 prices
 Divide the sales revenue (yr 5 at yr 1 prices) by the index for year 1 , then multiply the answer by the index for year 5
Sandy
sandy@sandyhood.comSandy
sandy@sandyhood.com
www.sandyhood.com1 
Thank you Sandy for your help  that has helped a lot
0 
Thanks Jayney and Sandy
Sandy you are awesome your explanation is so clear to understand and precise. You have saved me from going into bewilderment.
Kind regards to both
Shilpa
0
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