Please can somebody help with this question, I know its one of the easier ones but its just thrown me!

Calculate a sales rev forecast for year 5
Use the sales price index to calculate sales rev for years 1 to 4 at year 1 prices
Project the sales rev at year 1 prices forward to year 5
Calculate the year 5 sales rev forecast

Year 1 Actual Year 2 Actual Year 3 Actual Year 4 Actual Year 5 Actual
Sales Revenue 1,200 1,323 1,500 # #
Sales Price Index 112.0 114.0 120.0 124.0 128.0
Sales rev @ Y1 Prices # # # # #

I understand the layout is poor when i post this discussion - the years 1-5 are along the top in the table and then there are 3 rows
(Fill # in...)

Its the only question like it in the Revision Kit i can find, and the answers dont explain how to figure it out
I believe its indexing, but its thrown me, i dont know whether its the layout or what

please can somebody help me?

Thanks :)


  • wabisabi
    wabisabi Feels At Home Registered Posts: 130

    I've just done Budgeting so it's all fresh in my head :)

    To work out the bottom row value, you need to divide the actual sales by the index for that year then multiply by the year you want to get to.

    So the first value will be 1200, then 1300 and 1400.

    You can use this trend to establish that Y4 and 5 will be 1500 and 1600, then use these figures to work out the actual sales for Y4 and Y5:

    e.g. for Y4 it will be 1500 / 112 x 124 = 1661 (as 1500 is the actual sales at Y1 prices we divide by the index for Y1, then multiply by the index for the year we want to get to Y4)

    Hope this helps :)
  • jessbill3
    jessbill3 Registered Posts: 17

    Ahhh perfect then!

    Brilliant, that helps a lot - just a shame there arent more of those questions for me to practise! nevermind! thanks again for your help! :)
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