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Hi john sir, plz look at the following questing and make it confirm
A company will forecast its quarterly sales units for a new product by using a formula to predict eh base sales units and the adjusting the gigure by a saesonal index. The formula is BU= 3000 + 20Q; where
BU= base sales units and Q is the quarterly period number; the seasonal index value are:
Quarter 1# 95%
Quarter 2# 100%
Quarter 3# 95%
Quarter 4# 110%The forecast change in sales units from Quarter 2 to Quarter 3 is:
I calculated decrease of 152 units as ( 3040 * 95/100 )
But book provides decrease of 133 units.
The forecast for quarter 2 would be (3000 + (20 x 2)) x 100% = 3040
The forecast for quarter 3 would be (3000 + (20 x 3)) x 95% = 2907
The decrease is 3040 – 2907 = 133 units.
Dear John Sir,
In Hindsight just wanted to have a logical explanation on practical applicability of this formula.
Is it logical for a company to have an equation like 20Q where Q is the quarter number. Now it doesnt fit my logic that what will happen in quarter 4 as compared to quarter 1 that the multiplication coefficient would be 4 to this figure.
I know that this is no technical difficulty but being in your company i like to think a lil out of box and not concentrate just on exam.
Thanks Again
AmitIt would be extraordinary if it worked anything like so perfectly in practice.
However there is some logic in that it would in some cases be reasonable to assume (ignoring seasonality) that sales would increase quarter by quarter. In this case it is assuming that sales increase by 20 every quarter. It is the idea of sales increasing so steadily – by exactly 20 each quarter – that is perhaps not realistic.
Great John sir..I really like it when you concur to my thought process 😉
I really owe you a lot for making things so crystal clear that such doubts emanate…
You are a starr and a human being par excellence..
Thanks Again
Amit
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