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September 19th, 2017, 02:30 PM   #1
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Growth rate question

In 2016, item cost is £6 and number of units sold is 10 generating a total cost of £60
in 2017, item cost increases to £7 and number of units sold increases to 15 generating a total cost of £105

Question:

Of the 75% increase in cost, how much is due to price increases and how much is because of volume increase?
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September 19th, 2017, 03:11 PM   #2
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It's probably expected that you say the 75% increase in cost comprises 25% due to the price increase and 50% due to the volume increase.
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September 20th, 2017, 01:12 AM   #3
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How did you arrive at that?
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September 20th, 2017, 05:41 AM   #4
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If the only change had been the increase in cost per unit, then the increase in cost from 6 to £7 would have raised the cost by £10. If the only change had been that the number of units went from 10 to 15, that would have raised the cost by £30. That adds to only £40 so there must have been some other reasons for the rise in cost. The cost per unit accounts for 10/60= 1/6 or 16.7% of the increase. The increase in number of units accounts for 30/60= 1/2 or 50% of the increase. The "other reasons" account for the remaining 33.3% of the increase.
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