Question

The current production target for the five year plan of the Bowden company is to increase output by 9 percent a year. If the 2010 production is 5.81 million tons, what is the target production for 2015?

Answer 1

Here we can use the following formula to calculate the required target production.

A= P * (1+ R%)ⁿ

where, A is the target production, P is current production or production in 2010, R is the rate of increase and n is time period, which is 5 years here (i.e. (2015 - 2010).

Now, putting these values in the above equation, we get,

A= 5.81 * (1+ 9%)⁵

A = 5.81 * (1+ 0.9)⁵

A = 5.81 * (1.09)⁵

A = 5.81 * 1.5386239549

A = 8.9394

So, the target production for 2015 is 8.9 million tons