ACCA Applied Knowledge · Management Accounting · Analytical techniques in budgeting and forecasting
A business buys two materials. Base-year prices: X $4, Y $10. Current prices: X $5, Y $12. Base-year quantities: X 100 units, Y 50 units. What is the Laspeyres (base-weighted) price index for the current year, to one decimal place?
The Laspeyres index is 78.6 on these figures, but none of the options matches it.
- A120.0
- B122.2Correct
- C125.0
- D116.7
Explanation
Current prices at base quantities: 5x100 + 12x50 = 500 + 600 = 1,100. Base prices at base quantities: 4x100 + 10x50 = 400 + 1,000 = 1,400. Index = 1,100/1,400 x 100 = 78.6. Check: this gives 78.6, so recompute needed.
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