Price Index Calculation

In this example, the period is January 01, 2020, to December 31, 2022. On January 01, 2021, the current Price Index is 110.5, and the base Price Index rate is 105.65 (the Price Index value at the time the contract starts).

In the SBS ARCB Billing Price Adjustment page, you set Price Index Calculation to Base Price Index.

The price adjustment amount is calculated with the initial amount of 1000.00:

  • 1000.00 + (110.5–105.65)/105.65*1000 = 1045.91

Similarly, the price adjustment amount for period January 01, 2022, where Price Index is 114.25 is calculated as follows:

  • 1000.00 + (114.25-105.65)/105.65*1000 = 1081.40

In the SBS ARCB Billing Price Adjustment page, you set Price Index Calculation to Prior Price Index.

The period is January 01, 2020, to December 31, 2022. The current Price Index on January 01, 2021, is 110.5, and the base Price Index rate is 105.65 (the Price Index value at the time the contract starts).

The first price adjustment amount is calculated with the amount of 1000.00:

  • 1000.00 + (110.5–105.65)/105.65*1000 = 1045.91

Similarly, the price adjustment amount for period January 01, 2022, where Price Index is 114.25 is calculated as follows:

  • 1045.91 + (114.25-110.5)/110.5*1045.91 = 1081.40

Notes:

  • The price adjustment process uses the latest Price Index value, regardless of the index date.
    For example, if the price adjustment happens in September, but the latest Price Index value is for July. The July index is used. No adjustments are made after the September index is entered.

Prorated Price Adjustment

If the price adjustment happens in the middle of a billing period, the amount will be prorated. For example, the billing period is August 01, 2020, to July 31, 2021. The Price Index value is 244 on Price Index Date September 01, 2019, and 250 on Price Index Date September 01, 2020. If the previous rate is 1000, the following equations show how the billing amount for this period is calculated:

  • Price Index changes = (250 – 244)/244 = 2.459%
  • Current Rate = 1000.00 * 2.459% = 1024.59
  • Number of days @ current rate = July 31, 2021 – September 01, 2020 = 334
  • Previous Rate = 1000.00
  • Number of days @ previous rate = August 31, 2020 – August 01, 2020 = 31
  • Total number of days in the billing period = July 31, 2021 – August 01, 2020 + 1 = 365
  • The billing amount for this period = 1000.00*31/365 + 1024.59*334/365
  • = 1022.50

Price Adjustment Using Price Index and %

Price adjustments can also be done by Price Index. The Price Index + 3% price adjustment starts on January 01, 2020, with Annual frequency. Amount billed for January 01, 2019 to December 31, 2020, is 4000. The billing period to be adjusted is January 01, 2020 to December 31, 2020. The Price Index value is 205.3 on the Price Index Date December 01, 2018, and also is 219.6 on the Price Index Date December 01, 2019. If previous rate is 4000.00, the following equations show the billing amount for this period is calculated:

  • Price Index changes = (219.6 – 205.3)/205.3 = 6.965%
  • Current Rate = 4000.00 * 6.965% - 4000.00 = 278.60
  • Percentage changes = 4000.00 * 1.03 - 4000.00 = 120
  • Billing amount = 4000.00 + 278.6 + 120.00 = 4398.6

 

In the Price Index master page, under the Price Index master fields, there is a Boolean button named % Index, which will define whether the Price index Values on the Price index lines will be in % or not.. If this is enabled, then the calculations will be in percent.

Percent Index Toggle Switch