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(This question is from ACCA practice tests and there are no answers to it.)
Q)) Two years ago the price index appropriate to the cost of material X had a value of 120. It now has a value of 160.
If material X costs $2,000 per kg today, what would its cost per kg have been two years ago?
My working: 160/120 * 2000 = $2666.7
Is my answer correct?
You have misread the question.
It asked that the cost would have been two years ago. You are calculating what the cost would be now if the cost two years ago was $2,000.
Given that the cost today is $2,000, you need to go backwards to work out the cost 2 years ago (which would obviously be lower and not higher :-))
So what you should have done is take 120/160 x $2,000.
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