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A company is preparing its forecast sales information for the end of the current year. The actual sales information for the first nine months of the current year (20X1) is below:
Month – Sales Volume (Units):
Jan – 172,100
Feb – 149,600
Mar – 165800
Apr – 182600
May – 160100
Jun – 197100
July – 174600
Aug – 190800
Sep – 207600Calculate: 1. The sales volume trend is to be identified using 5 points moving average. What is the monthly trend?
Answer: 5000 units2. What is the expected sales volume including seasonal variation for December 20X1?
Answer: 199,600 unitsActually I m trying to solve these questions but unsuccessful, can u please explain me in detailed about these questions. Thanks in advance. GBU
I am surprised that whichever book you got this example from did not explain the answer!
However, since it is a 5 point moving average, the first moving average is (172100 + 149600 + 165800 + 182600 + 160100) / 5 = 166040 (and this corresponds with March because it is in the centre)
The second moving average is (149600 + 165800 + 182600 + 160100 + 197100) / 5 = 171040 (and this corresponds to April because that is now the centre of the 5).
You can calculate the remaining moving averages yourself in the same way. You will find that the moving average increases by 5000 per month.
The last moving average you can calculate is 186040 and this corresponds to July.
Since the trend is increasing by 5000 per month, the trend figure for December will be July’s trend of 186040 + another 5 months increasing at 5000 per month. This gives a trend figure for December of 211040.
Finally, to get the actual forecast for December, since it is a 5 point moving average, the cycle is January to May, then June to October, then November to March, and so on.
December is the second month in the cycle. The only month we can compare it with is July because it is the second month in the cycle as well.In July, the actual sales were 174600 whereas the trend sales (as above) were 186040. So there is a seasonal variation of the difference of 11440.
So the forecast for December is 211040 – 11440 = 199600.Hello sir, apology if my question might sound stupid, i wanted to know how December is second month in the cycle? Because as it says it’s 5 point moving average that is “Jan-May, June-Oct, Nov-March”, wouldn’t it be 3rd month instead of 2nd in the cycle?
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