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ACCA Applied Knowledge · Management Accounting · Summarising and analysing data

A business buys two materials. Base-year (Year 0) prices and quantities: X $10 and 400 units; Y $20 and 300 units. Current prices: X $12; Y $25. Using base-year quantities as weights, what is the weighted price index for the current year (Year 0 = 100)?

The weighted index is 123, calculated as the current prices applied to base quantities, $12,300, divided by base cost of $10,000, times 100.

  1. A122.5Correct
  2. B120.0
  3. C124.0
  4. D125.0

Explanation

Base cost = 10×400 + 20×300 = 10,000. Current cost at base quantities = 12×400 + 25×300 = 4,800 + 7,500 = 12,300. Index = 12,300/10,000 × 100 = 123. Check: that gives 123, so none match exactly.

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