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- This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.

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- October 10, 2018 at 9:53 am #477032
Hello John

Please can you help me to understand this equation. The text below is from the Kaplan study text as i use this but i watch all of your videos as i find your videos help me a lot to clarify a lot of the Jargon in the study manual. To be honest if it wasn’t for your videos i don’t think i could follow Kaplan….anyway here is the question

W plc is preparing its budgets for next year. The following regression equation has been found to be a reliable estimate of W plc’s deseasonalised sales in units: y = 10x + 420 Where y is the total sales units and x refers to the accounting period. Quarterly seasonal variations have been found to be:

Q1 Q2 Q3 Q4

+10% +25% –5% –30%

In accounting period 33 (which is quarter 4) identify the seasonally adjusted sales units:I know the answer as this is Y= 10 X 33 + 420 X 0.7 = 525

But i’m confused on the 10……where does the 10 come from what is it? 420 is the sales and 33 is the amount of quarters as the equation started in year 1 on quarter 4, so i get all that but i just don’t understand the 10. I mailed my Kaplan tutor and she said this…..

“I don’t really know what to say to you about the 10. It’s what the company set when they determined the equation. It never changes. It’s always 10. Only the x bit will change.

It’s not always 10 for every company. Just whatever equation the individual company decides best depicts their situation”.

I thought you might be able to help me to gain a better understanding of the number 10 used in the equation as i get that the company sets this figure but they won’t just pluck it out of thin air as it has to have a meaning. I understand that i don’t need to calculate it if it were in the exam, but to be a good accountant i want to understand it and don’t just want to learn the equation parrot fashion if this makes sense

Kind regards

Claire

October 10, 2018 at 7:17 pm #477117For heavens sake don’t worry about this sort of thing in the exam.

However it would seem that as the period moves up from quarter to quarter, then so the sale move up from quarter to quarter – they are always 10 multiplied by the quarter (plus the 420).

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