Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Forecast

- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.

- AuthorPosts
- September 21, 2022 at 5:47 pm #666937
A company uses a multiplicative time series model to forecast sales. The trend in sales is linear and is described by the following equation:

Trend = 400 + 10 T

Where T = 1 denotes the first quarter of 20X0

T = 2 denotes the second quarter of 20X0 etc.The average seasonal variations are as follows:

Quarter 1 2 3 4

% Variation -30 +40 +10 -20What is the sales forecast for Quarter 3 of 20X1?

480 units

423 units

517 units

3,157 units

Correct Answer

517 unitsT = 7 (4 quarters in 20X0 plus 3 quarters in 20X1)

Variation for quarter 3 = + 10%Sales forecast = 517 units ((400 + (10 x 7)) x 1.1)

Sir John,

I do not understand why they did (10 x 7)) x 1.1)

I thought it suppose to be (10 x 7) x 0.1

Sir you had told me using the additive model = 0

and multiplicative model = 4can you please clarify the multiplicative model . I am getting 0 when I add all seasonal variation up, I’m not getting 4

September 22, 2022 at 8:47 am #666953Where did you find this question? Because they way it is presented is very poor in that the seasonal variations they have given are more sensibly using the additive model rather than the multiplicative model (which is why they add up to zero).

With the multiplicative model, they should really be presented as 0.70 (a fall of 30% means it is 70% of the trend); 1.4 (an increase of 40% means it is 1.4 times the trend); 1.10 and 0.80.

Now the do add up to 4, and the rest of the answer should now make sense 🙂

September 23, 2022 at 5:17 pm #667088Sir John this is one of the mock exam questions

September 24, 2022 at 8:41 am #667128I don’t know which mock exam you are referring to, but I have explained it anyway in my previous reply 🙂

- AuthorPosts

- You must be logged in to reply to this topic.