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How to Calculate Escalation

by Mark Kennan, Demand Media

    Escalation refers to the increase of something over time. Often, escalation is used to describe increasing costs, such as the escalation of lunch prices, household goods or business supplies. Past escalation can be used as a predictor of future increases, or it can be used to adjust contracts. For example, a contract may increase salaries each year based on the escalation of the consumer price index (CPI). To calculate escalation, you need to know the original cost and the final cost.

    Items you will need

    • Calculator
    Step 1

    Consult your financial records to determine the cost of the expense at the start of the escalation period. For example, if you wanted to calculate the escalation in your school's lunch price over the past three years, you would look up how much you paid for lunch three years ago.

    Step 2

    Look up the current price of the expense. Continuing the lunch example, you would use your current lunch price.

    Step 3

    Subtract the initial price from the current price to calculate the price increase. For example, if three years ago you paid $4 for lunch and today you pay $4.50, you would subtract $4 from $4.50 to get $0.50.

    Step 4

    Divide the price increase by the initial price to calculate the escalation rate as a decimal. In this example, you would divide $0.50 by $4 to get 0.125.

    Step 5

    Multiply the escalation rate expressed as a decimal by 100 to find the escalation percentage. Finishing this example, you would multiply 0.125 by 100 to find the escalation of your school's lunch price is equal to 12.5 percent.

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    About the Author

    Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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