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Hello,
Severe need of some help in the calculation with regards to ACCA December 2013 paper. I do not understand how the trend value of 149 (Q1 2013) and 151 (for Q3 2013) are calculated. Adding the seasonal variation to the trend is fine. Precisely on what’s their logic behind those two numbers (‘best guess’ and ‘hand drawn’ respectively is mentioned) explanation is needed.
Thank you very much for your prompt reply in advance.
Kind regards.
One way of estimating the trend is to say that it has risen from 131 to 146.25 in 9 increments (figure 2) so about 1.7 per quarter. Adding that onto the last trend of 146.25 gives 148 (which would be acceptable). I am not sure either precisely what calculation was used to get 149, but we are trying to predict the future and different assumptions are ok. As the answer says, there is no agreed way of extrapolating the trend.
Using this method would add another 1.7 on to get Q2 2013 would give 150.
The other approach would involve sketching a graph of the trend line then extending it by eye. I can’t imagine anyone would have done that in the exam.
Any reasonable approach you take would be accepted.
The model answer could be better worded.
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