ACCA Applied Knowledge · Management Accounting · Analytical techniques in budgeting and forecasting
A company uses an additive time-series model to forecast quarterly sales. The trend forecast for Quarter 3 of next year is 12,400 units, and the seasonal variation for Quarter 3 is -450 units. What is the forecast sales volume for that quarter?
The forecast is 11,950 units. In an additive model the seasonal variation is added to the trend, so the trend of 12,400 units plus the negative seasonal variation of 450 units gives 11,950. Subtracting a negative figure would wrongly raise the forecast.
- A12,850 units
- B12,400 units
- C11,950 unitsCorrect
- D11,500 units
Explanation
In an additive model, forecast = trend + seasonal variation = 12,400 + (-450) = 11,950 units. 12,850 results from subtracting the negative variation, which is a sign error. 12,400 ignores seasonality entirely.
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