In: Statistics and Probability
A certain manufacturing company has the following data on quantities shipped and unit costs for each of its four products.
Products | Base-Period Quantities (Year 1) |
Mean Shipping
Cost per Unit ($) |
|
---|---|---|---|
Year 1 | Year 5 | ||
A | 2,500 | 10.50 | 15.90 |
B | 5,000 | 16.25 | 31.00 |
C | 6,500 | 12.20 | 17.40 |
D | 2,500 | 20.00 | 35.50 |
Use the price data to compute a Paasche index for the shipping cost if year 5 quantities are 4,000, 3,000, 7,000, and 3,000 for products A, B, C, and D, respectively. (Round your answer to the nearest integer.)
I5 =
Products | Base-Period Quantities (Year 1) |
Mean Shipping
Cost per Unit ($) |
|
---|---|---|---|
Year 1 | Year 5 | ||
A | 1,500 | 10.50 | 15.90 |
B | 5,000 | 16.25 | 31.00 |
C | 6,500 | 12.20 | 17.40 |
D | 2,500 | 20.00 | 35.50 |
Use the price data to compute a Paasche index for the shipping cost if year 5 quantities are 3,500, 3,000, 7,000, and 3,000 for products A, B, C, and D, respectively. (Round your answer to the nearest integer.)
I5 =
Answer:
1)
Product | Quantity | Year 1, (base year) | Year 5, (Obs year) | Quantity*obs cost | Quantity*Base cost |
A | 2500 | 10.50 | 15.90 | 2500*15.9 = 39750 | 2500*10.5 = 26250 |
B | 5000 | 16.25 | 31.00 | 5000*31 = 155000 | 5000*16.25 = 81250 |
C | 6500 | 12.20 | 17.40 | 6500*17.4 = 113100 | 6500*12.2 = 79300 |
D | 2500 | 20.00 | 35.50 | 2500*35.5 = 88750 | 2500*20 = 50000 |
Total | 393600 | 236800 |
Price index = 393600/236800 *100 = 166.216 166
[OR]
1)
Paasche price index formula =
In our case we have our observational year as year 5 and base year as year 1.
Product | Year 5 (Obs qty) |
Shipping Cost | obs qty * obs cost |
Obs qty * Base cost |
|
Year 1 (base year) |
Year 5 (Obs year) |
||||
A | 4000 | 10.5 | 15.9 |
4000*15.9 = 63600 |
4000*10.5= 42000 |
B | 3000 | 16.25 | 31 | 93000 | 48750 |
C | 7000 | 12.2 | 17.4 | 121800 | 85400 |
D | 3000 | 20 | 35.5 | 106500 | 60000 |
Total | 384900 | 236150 |
Passche index = 384900/236150 = 162.98 163
Final Answer : Paasche price index = 163
2)
Paasche price index formula =
In our case we have our observational year as year 5 and base year as year 1.
Product | Year 5 (Obs qty) |
Shipping Cost | obs qty * obs cost |
Obs qty * Base cost |
|
Year 1 (base year) |
Year 5 (Obs year) |
||||
A | 3500 | 10.5 | 15.9 |
3500*15.9 = 55650 |
3500*10.5= 36750 |
B | 3000 | 16.25 | 31 | 93000 | 48750 |
C | 7000 | 12.2 | 17.4 | 121800 | 85400 |
D | 3000 | 20 | 35.5 | 106500 | 60000 |
Total | 376950 | 230900 |
Passche index =376950/230900 = 163.25 163
Final Answer : Paasche price index = 163
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