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varialble cost for 4 years
2.80 for 1st
3 for 2nd year
3 for 3rd year
3.05 for 4th yearfixed costs are 1 million ,1.8 million, 2.8 million abd 3.8 million in 4 years !
in the question they said average general of inflation is 3% per year and s.p , v.c , f.c and wc all experince inflation of this level
it means we will increase all of then by just 3% inflation per year right ??
in answer they have not increased vc and fc by 3% in 2nd,3rd and 4th year but in 1st year they havr increased it by 3%
my question is why they are not increaing it by 3%
and whats the logic behind that increaseand please kindly check that question
qauestion no. 1
june 2011 f9 past paper
kindly check out the answer
i will be gratefull if u will help me in thisBut the answer has increased them all by 3% each year (and has shown the workings for each of them separately!!)
Variable costs in year 1: 700 x 2.80 x 1.03 = 2019 (thousand)
In year 2: 1600 x 3.00 x 1.03^2 = 5092 (thousand)
and so onFixed costs in year 1: 1000 x 1.03 = 1030 (thousand)
In year 2: 1800 x 1.03^2 = 1910 (thousand)
and so onAll the costs are given in current prices and so to inflate you multiply by 1.03 to get the flow in the first year; 1.03^2 to get the flow in the second year, and so on.
Have you watched my free lectures on this?
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