Over an 18-month period, sales have been found to have an underlying linear trend of
y = 7.112 + 3.949x, where y is the number of items sold and x represents the month. Monthly deviations from trend have been calculated and month 19 is expected to be 1.12 times the trend value.
What is the forecast number of items to be sold in month 19?
Sir I don't understand how you get the figure for this question
I took the approach of
y=7.112+3.949(19)
And I got the trend
Then I used the equation
Seasonal Variation = Sales-Trend
(82.143*7)+82.143= sales
Apparently this method is wrong sir and I want to ask why
How did this happen sir
My confusion is why have they assumed the seasonal variation to be the same as sakes because the question clearly asks
'what is the forecasted number of items to be sold in month of 19'
How did they assume that sales forecast to be as seasonal variation
Isn't it supposed to be the sales sir?
Ask the Tutor ACCA MA
Forecasting sales
5y ago#1Y does equal 82.143.
However I have no idea at all how you got your next equation.
The question specifically says that month 19 is expected to be 1.12 times the trend value.
(Which is using the multiplicative approach to the seasonal variations).
If the trend value is 82.143, then the forecast is 1.12 x 82.143.
Sir I used the equation
Forecast= Sales+ Trend
Sir they have asked for the forecast and not the seasonal variation, yet they have used the seasonal variation instead
I'm confused because they specifically say the word
"Monthly deviations from trend ......"
Doesn't this mean that to find the variation we multiply the trend by 1.12
However we actually need the forecasted figures instead right sir?
5y ago#3I have no idea where you got your equation from, because it is wrong!!
With the multiplicative model, the forecast is the trend multiplied by the seasonal variation.
Have you watched the lectures on this?
Oh shoot sorry sir
I meant the equation to be
Forecast =Trend* Seasonal Variation
Please Ignore the equation i earlier put in my previous reply...that was anyways wrong and I accidentally showed it for additive model instead
I understand clearly where i went wrong now..thank you very much sir...but i still have just one small doubt...
Sir how did you figure that this was a multipicative model
It's because they said the word 1.12 'times' isn't it
'Times' is associated with multipication signs usually and that''s why we assumed it was multipiicative model( yes this concept sort of sounds dumb in regard to a technical formula but I'm just wondering whether this could be a possible reason)
Also in another scenario where the question asks for an additive model but do not directly ask it
How would the question usually be worded so that we know that it is askiing for an additive model?
5y ago#5'Times' means multiply and so that is why this is the multiplicative model.
If it was the additive model then the variations would be given in units sold.
I understood the question clearly now sir
Thank you so much for clearing the doubts
5y ago#7You are welcome :-)
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