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TYU 7 in ch 11 of kaplan 2012.
in the solution, under customer heading.
they find turnover in 20X1 volume. i didnt understand why they do that step.they also state,” prices have risen at approximately 9.1% pa, which is well above the rate of inflation for the period 1.4%.
how they get this percentage.?
thanks for ur help, sir.I am teaching away from home this week and so I do not have the Kaplan text with me.
I will rep,y to your question over the weekend when I am back home.
Turnover will increase for two reasons – higher volume of sales and/or higher prices.
Since we know from the question that the volume growth is 2% p.a., it can be removed (as they have done in the answer) so that we can then see how much of the growth in turnover is due to higher prices. (The clue to actually doing this is where the question says that the regulatory body restricts the extent to which prices can increase.)The way that the calculate the 9.1% is this. If we take out the volume growth of 2%, the turnover would have increased from 450 to 584. Between the two there are three years of growth, and so you can get the average growth rate from:
450 x (1+g)^3 = 584 (where g is the average rate of growth).
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