Question

Your boss is the director of reporting for the AthensCounty Construction Agency (ACCA). It has beenhis job to track the cost of construction in AthensCounty. Twenty-five years ago he created the ACCACost Index to track these costs. Costs during the firstyear of the index were $12 per square foot of con-structed space (the index value was set at 100 forthat first year). This past year a survey of contractorsrevealed that costs were $90 per square foot. Whatindex number will your boss publish in his report forthis year

Answer 1

Consider the equation as follows

Initial Price(Ct)/Final Price(Cf) = Initial Index(It)/Final Index(If)

Substitute $12 for Ct, $90 for Cf and 100 for If

$12/$90 = 100/If

If = 750

Therefore, the index number which will be published by the boss in his report is 750

Substitute $12 for Ct, 100 for It and 600 for If

$12/Cf = 100/600

Cf = $72

Therefore, the cost per square foot last year was $72