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Inflation related adjustments

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Inflation related adjustments

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • Author
    Posts
  • March 29, 2021 at 10:53 pm #615482
    Skynet110
    Member
    • Topics: 2
    • Replies: 1
    • ☆

    Sir.. could you please explain how inflations for sales is adjusted in the following situation.

    Annual sales are expected to be 30,000 units in Years 1 and 2 and will then fall by 5,000 units per year in both Years 3 and 4. The selling price in first-year terms is expected to be $4.40 per unit and this is then expected to inflate by 3% per annum.

    Also, could you please briefly explain different terms which examiner may use in exam such as “first-year terms” etc. and there relevant adjustment.

    March 30, 2021 at 8:34 am #615494
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    Have you watched all of the lectures on inflation?
    The flow at time 1 is 30,000 x $4.40; at time 2 is 30,000 x 4.4 x 1.03 at time 3 is 25,000 x 4.4 x 1.03^2, and at time 4 is 25,000 x 1.03^3

    ‘First year terms’ is not a phrase normally used in the exam, but explains itself – it is the selling price in the first year.

    I explain the terms in the lectures.

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