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A company uses time series analysis and the additive model when preparing its cash budget
1) the latest trend figure for sales calculated for january 20X1 was $2,135,000
2) On average the trend is increasing by $17,000 each month
3) Seasonal variations are estimated to be:
feb -$162,000 march +$135,000 april + $181,000What should the company’s budgeted sales figure be for april?
A) 2,340,000
B) 2,289,000
C) 2,186,000
D) 2,367,000Sir I have problem in this question, I can’t figure out what we are supposed to do here, and it says additive model, so we are supposed to use this formula “y=a+bx”? I tried every method still I can’t figure out, first i thought we have to simply deseasonalize the trend figure since it asks for budgeted sales, eventually adding negative seasonal variations and deducting positive one’s, but even that didn’t come out with the answer, also additive model specifies that we have to sum upto zero, could you please help out with this question?
The trend is increasing by $17,000 each month. April is 3 months after January, and so the trend for April will be 2,135,000 + (3 x 17,000).
Having got the trend, then the forecast for April will be the trend for April plus the seasonal variation for April.
Sir i really did arrive at that answer, but the misconception of actual and budgeted sales, because seasonal variation is diff between actual sales and trend, so i thought if i would simply plus trend with seasonal variation it would give us actual sales not budgeted, hence the question asks for budgeted facepalm, thankyou sir!
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