Maintenance expenses for production department XYZ were $235,000 in 1999. You ar
ID: 2744106 • Letter: M
Question
Maintenance expenses for production department XYZ were $235,000 in 1999. You are benchmarking vari- ous departments, and using 2007 dollars for the comparisons. However, data for XYZ for 2007 are not available, so you will use the 1999 data and adjust the value for inflation. The price index values for your industry are as follows:
1983
1999
2000
2001
2002
2003
2004
2005
2006
2007
100
187.6
193.2
202.9
211.0
218.4
228.2
232.8
239.2
244.8
Determine the value of the maintenance expenses in 1996 but expressed in 2004 dollars.
1983
1999
2000
2001
2002
2003
2004
2005
2006
2007
100
187.6
193.2
202.9
211.0
218.4
228.2
232.8
239.2
244.8
Explanation / Answer
Maintenance expenses in2004 = Maintenance expense in 1999 / Price index of 1999 * Price index of 2004
= 235000 / 187.60 * 228.20 = 285858.20
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