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Forums › Ask CIMA Tutor Forums › Ask CIMA P1 Tutor Forums › Trend Analysis – seasonal variations
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
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