Question

Equipment costing $100,000 was purchased when the appropriate cost index was 1500.0. What is the cost...

Equipment costing $100,000 was purchased when the appropriate cost index was 1500.0. What is the cost estimate for a similar equipment when the cost index is 2000.0?

Please no excel

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Answer #2

Equipment cost = $100000

Cost index during purchase = 1500

= Price / cost index

= $100000/1500 = 66.6667

Increase in cost index represents the increase in the price of the equipment.

Similar equipment cost when cost index is 2000

=(Price /cost index )*new cost index

= 66.66667* 2000

Similar equipment cost when cost index is 2000= 133333.33

Another method

Calculate the percentage increase in cost index

So, 2000-1500/1500 = 500/1500 = 0.3333

So, the new cost = 1000000*1.3333

Similar equipment cost = $133333.33

answered by: anonymous
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