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Hi John sir, how are you? John sir explain me following. I feel indexes tough area.
Q#1. 5 years ago an item was costing $10. The relevant index number 5 years ago was
125.
The same index now stands at 220. What is the current cost of the item?
John sir plz also explain the calculations. it will be a great favour for me.Q#2. In 2008 a company purchased 10,000 kg of material for a total cost of $25000. In 2011
they purchased 12000 kg of same material and paid a total cost of $38000.What is the 2011 price index for this material? ( with 2008 as base year )
( John sir in question 2 , you calculated cost per kg $3.17 for year 2009. Especially i could’t get it. )
Q1 If the index number was 125 and is not 220, the it means for every $125 we would have spent 5 years ago we would not have to spend $220.
So….if an item cost $10 5 years ago, it would now cost 10 x 220/125
Q2 Is exactly the same but backwards. You can get the same figure several ways.
In 2008, 10,000 kg cost $25,000
In 2011, the same quantity would cost 10,000/12,000 x $38,000, which is $31,667.So the index number is (31,667 / 25,000) x 100
Sorry – it may be my mistyping of the word ‘now’ as ‘not’ that has confused you.
My previous reply should read:
Q1 If the index number was 125 and is now 220, then it means that for every $125 we would have spent 5 years ago we would now have to spend $220.
So….if an item cost $10, 5 years ago, it would now cost 10 x 220/125
Does that help now?
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