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1. The formula to calculate the incrase in COS in Q2, Q3 and Q4.
2. And for the fuel tax increase please
Thank you
Cos is explained in W2
Q2 budgered cos = 7120
Appendix 2 , Note 1 says this should 2% higher, so an increase of 2% x 7120 = 142.40. Cos now = 7262.40.
50% of this is at the old exchange rate of 1.4. The V$ for this 50% is 50% x 1.4 x 7262.40 =5,083.68
At new exchange rate of 1.5, C$ = 5,083.68/1.5 = 3,389.12
Difference = 3389.12 – 7262.4 x 50% = 242.08
The model answer figure of 242.2 is a rounding error as 6.67 was used instead of 6.6666666%.
The total fuel cost includes tax of 60%. Net of tax the fuel cost is Gross cost x 100/160. This increases by 3%. So the adjustment is 3% x 100/160.
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