Stuck- index of prices

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Primble
Primble Registered Posts: 734 Epic contributor 🐘
in AAT Level 3 (Level 6 in Scotland)
Hi, Am doing a question and i cannot get my head around this.
Turnover for last three years was
2002 £1130000
2003 £1175000
2004 £1210000

general index of prices
2002 = 108.2
2003 = 110.5
2004 = 112.9

restate the turnover for 2002,2003.2004 in terms of 2002 prices.

would it be
2002 £1130000
2003 (£1175000 x 1.1082)= 1302135
2004 (1210000x1.1082)=1340922

is this right?

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  • Kris
    Kris Registered Posts: 11 New contributor 🐸
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    The index has gone up in both years therefore when we adjust the 2003/4 prices they should end up lower when we consider them in 2002. This is because the turnover in later years has been inflated by the increase in the price index.
    You also need to consider that in 2003 the base was 108.2.

    (price/index for that year) x index for base year.


    2003 £1175000 / 110.5 * 108.2 = 1150543
    2004 £1210000 / 112.9 * 108.2 = 1159628

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