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CMA Final · Strategic Cost Management · Business Forecasting Models - Time Series and Regression Analysis

A Coimbatore firm fits a linear trend Y = a + bX to 5 years of output data with X coded as -2, -1, 0, 1, 2. The sum of Y is 400 and the sum of XY is 120. Forecast output for the year coded X = 4.

The forecast is 128. With coded X summing to zero, a is 400/5 = 80 and b is 120/10 = 12. At X = 4, Y = 80 + 12 x 4 = 128. Using X = 2 would incorrectly give 104.

  1. A80
  2. B104
  3. C120
  4. D128Correct

Explanation

With coded X summing to zero, a = sum Y/n = 400/5 = 80. b = sum XY / sum X^2 = 120/10 = 12. Y at X=4 = 80 + 12x4 = 128. Option 104 uses X=2 instead of 4.

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