Index question???

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gabriellenlewis
gabriellenlewis Registered Posts: 129
in AAT Level 4 (Level 8 in Scotland)
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.

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  • Adele69
    Adele69 Registered Posts: 320
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    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



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