Question

A certain manufacturing company has the following data on quantities shipped and unit costs for each of its four products.

Answer 1

Answer:

Paasche's Index=  168.63= 169

Step-by-step explanation:

Products

Base-Period                                                    Current Period

    Quantities    Mean Shipping                    Quantities    Mean Shipping

     (Year 1)         Cost per Unit ($)                  (Year 5)  Cost per Unit ($)

A         1,500         10.50                         4000                 15.90

B         5,000      16.25                            3000                 33.00

C         6,500        12.20                          8000                  18.40

D          2,500      20.00                         3000                   35.50

Paasche's Index= ∑ pn.qn/∑po.qn* 100

Where pn is the price of the current year and qn is the quantity of the current year and po. is the price of the base year and qo. is the quantity of the base year.

Paasche's Index is the percentage ratio of the aggregate of given period prices weighted by the quantities sold or consumed in the given period to the aggregate of the base period prices weighted by the given period quantities.

Multiplying the current year prices with the current year quantities and the base year price with the current year quantities we get.

Product               pn.qn                      po.qn

A                         15.90* 4000         10.50* 4000

                          = 63600                    =42000

B                       33.00*3000           16.25 * 3000  

                           = 99000                    = 48750

C                      18.40* 8000          12.20 *8000

                            =147200                 =97600

D                     35.50* 3000        20.00*3000  

                          =106500              60,000        

∑                          416300                  248350      

Paasche's Index= ∑ pn.qn/∑po.qn= 416300/ 248350 *100  =  1.676=1.68= 168.63= 169