Section A

Oceanic Freight, a cross-border shipping multinational, uses index numbers to analyze its fuel costs over the last decade.

What is the primary purpose of using index numbers in this context?

Answer options:

To calculate the exact volume of fuel consumed in liters.

To measure the relative change in fuel prices over time compared to a base year.

To eliminate the effect of fixed costs from the fuel budget.

To predict the exact daily exchange rate fluctuations.

How to approach this question

Recall the definition of an index number in statistics. It compares a current value to a base value.

Full Answer

B.To measure the relative change in fuel prices over time compared to a base year.✓ Correct

An index number is a statistical measure designed to show changes in a variable or group of related variables with respect to time, geographic location, or other characteristics. In cost analysis, it is primarily used to measure relative changes in prices or quantities over time compared to a chosen base year.

Common mistakes

Confusing index numbers with forecasting tools like moving averages.

Question 06 All questions Question 08

Practice the full ACCA MA — Management Accounting Practice Exam 6

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