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Hi! I dont understand in multiplicative model why the average should sum to 4 (if there are 4 quarters) which mean 1 for each quarter. Please explain it to me. Thank you!
Because some quarter will be more than 1 (because the actual is more than the trend) and some quarters will be less than 1 (because the actual is less than trend).
However because some are more and some are less, the total of them is 4 x 1 = 4.
H is forecasting its sales for next year using a combination of time series and regression analysis models. An analysis of past sales units has produced the following equation for the quarterly sales trend :
Y = 26x + 8850
Where the value of x represents the quarterly accounting period and the value of y represents the quarterly sales trend in units. Quarter 1 of next year will have a value of x of 25.
The quarterly seasonal variations have been measured using the multiplicative model are :
Quarter 1 -15%
Quarter 2 -5%
Quarter 3 +5%
Quarter 4 +15%Production is planned to occur at a constant rate throughout the year.
The company does not hold inventories at the end of any year.
The difference between the budgeted sales for quarter 1 and quarter 4 next year are what?
The answer given is 2940 units. Could you please explain me how that answer arrived?
For quarter 1, put x – 25 in the equation, and then subtract 15% from the result.
Quarter 4 will have a value of x = 28, so put x = 28 in the formula and then add 15% to the result.
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