Index question???

gabriellenlewis

Sales rev: Year 1 £12,200. Year 2 £12,747. Year 3 £13,527. Year 4 £14,091. Year 5 ?
sales price index: 110 114 120 124 130
Sales rev at year 1 prices:


I have been using the two formulas:

Index = Current price/ Base price x 100
New Price = Old price x Next index/ Current index


But not getting same answers as given?!

Thanks in advance.

Adele69

This isn't quite what the question asked.

i) use the price index to calc sales rev for years 1 to 4 (at year 1 prices)
Yr 1 actual £12220
Yr 2 calc £12300 (110/114 x 12747)
Yr 3 calc £12400 (110/120 x 13527)
Yr 4 calc £12500 (110/124 x 14091)

ii) project sales rev (at year 1 prices) for year 5
There is a trend increase of 100 per year so
Yr 5 calc £12600 (based on trend)

iii) calc the year 5 forecast
Since its at year 1 price, reversing the calc 130/110 x 12600 = £14891