In 1984, a three bedroom, two bath single-family detached home cost $65,000 to construct in Anytown, Arizona. The historical cost index for that area is 220 and currently is 378. Using the index method, what is the current replacement cost for this structure?
a. $112,000
b. $278,000
c. $37,800
d. $78,000
(a) Divide the current index by the historical index (378 / 220 = 1.718) and then multiply the result by the historical (or original) cost (1.718 X $65,000 = $111,682). Rounded, the best answer is $112,000. Page 376