Question

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	33.00
C	6,000	12.20	16.40
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, 7,500, 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 = 39,750	2500*10.5 = 26,250
B	5000	16.25	33.00	5000*33 = 165,000	5000*16.25 = 81,250
C	7,000	12.20	16.40	6000*16.40 = 98,400	6000*12.20 = 73,200
D	2,500	20.00	35.50	2500*35.5 = 88,750	2500*20 = 50,000
Total				391,900	230,700

Price index = 391,900/230,700*100 = 169.8743= 170

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