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Selling price and variable cost inflation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Selling price and variable cost inflation

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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  • October 2, 2019 at 12:03 am #547805
    tyshon
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    Dec 2014 past paper

    Sales units 95k 100k 150k 150k
    Sales price 25 25 26 27 Selling price inflation 4.2%
    VC 11 12 12 13 VC inflation 5%

    for the sales in year 1, I multiplied 25 by 1.042 and got 26.05 In year 2, I multiplied 26.05 by 1.042 and got 27.1441, but in year 3 when I multiplied by 1.042 again I got a different answer to ACCA’s answers. I saw some students said it should 27.1441*1.042^3.
    What does ^symbol means?
    ACCA has 29.42 for year 3? How did they arrive at that answer?

    October 2, 2019 at 8:32 am #547872
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51571
    • ☆☆☆☆☆

    What you have done would be correct if the selling price in year 3 had been 25 without inflation.

    However the selling price without inflation is 26. So with 3 years inflation it is
    26 x 1.042^3 = 29.42.

    1.042^3 is the way of typing 1.042 to the power 3.

    I do suggest that you watch my free lectures on this. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.

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