Question
A certain manufacturing company has the following data on quantities shipped and unit costs for each...
A certain manufacturing company has the following data on quantities shipped and unit costs for each of its four products.
|
Products |
Base-Period |
Mean Shipping Cost |
|
|
Year 1 |
Year 5 |
||
|
A |
1,500 |
10.50 |
15.90 |
|
B |
5,000 |
16.25 |
33.00 |
|
C |
6,500 |
12.20 |
18.40 |
|
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, 8,000, and 3,000 for products A, B, C, and D, respectively. (Round your answer to the nearest integer.)
I5 =
Homework Answers
Answer #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 | 33 | 99000 | 48750 |
| C | 8000 | 12.2 | 18.4 | 147200 | 97600 |
| D | 3000 | 20 | 35.5 | 106500 | 60000 |
| Total | 416300 | 248350 | |||
Passche index = 
= 167.62 
168
Final Answer : Paasche price index = 168
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