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+10T
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 -20
Ans is 517 units but my ans is 480
400+10×70=470
470+10=480
In the ans they have multiplied 470 with 1.1 I unable to figure out the derivation of that 1.1 figure ,if u could help me out it would be great
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3y ago#1The variations given in the question are % variations.
So the forecast is 470 + (10% x 470) = 517
But sir here they are using multiplicative model so how is (10/100×470) added shouldn't it be mulitiplied
3y ago#3Adding 10% is multiplicative. It is the same as taking 110%.
OK sir thank you so much ,sir if this question was based on additive model then the ans would have been 480
3y ago#5Yes, although then the variation would be given as 10 and not as 10%.
Thank you so much sir
3y ago#7You are welcome.
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