Struggling slightly with a question on the P1 mock on trend.
Could someone please break down the workings, for question below.
Many Thanks
James
The trend for sales of Product A is represented by the following:
y = 10,000 + 3,000x where:
y = trend for sales units in a quarter
x = the quarter number, where 1 = quarter 1 of year 1, and so on.
Actual sales of Product A in Year 1 were affected by seasonal variations.
The number of units sold in quarter 2 was 18,000.
What are the expected sales of Product A (in units) for Year 2, quarter 2, after adjusting for seasonal variations using the multiplicative model?
Give your answer to the nearest whole unit.
Answer is 31500
CIMA Forums
Trend Analysis - seasonal variations
Hi,
Ok so in Q2 yr1 - the quarter number will be 2 so we insert that into the trend equation:
The trend says that units for that period should be: 10000 + 3000(2) = 16000 units
The actual units were 18000
So it shows a quarter 2 seasonal variation of 2000 units (this means a 2000/16000 = +12.5% variation). We assume this variation will apply to all quarter 2 sales in future
So coming to calculate Quarter 2 - year 2 - our quarter number will be 6
For that period the trend says units will be 10000 + 3000(6) =28000units and we now need to increase this for a seasonal variation of 12.5%
so 28000 x 1.125= 31500 units
Hope you can follow - please let me know if not :-)
Cath
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