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ACCA Applied Knowledge · Management Accounting · Analytical techniques in budgeting and forecasting

A company's quarterly sales trend is y = 200 + 5x, where y is sales in $000 and x = 1 for Quarter 1 of Year 1. Using an additive model, the seasonal variation for Quarter 1 is -12 ($000). What is the forecast sales for Quarter 1 of Year 6 (x = 21)?

The forecast is $293,000. The trend value at x = 21 is 200 + 5 x 21 = 305 thousand. In an additive model the seasonal variation is added, so subtracting 12 for Quarter 1 gives 293. Ignoring the seasonal adjustment or reversing its sign would be wrong.

  1. A288
  2. B293Correct
  3. C305
  4. D317

Explanation

Trend at x = 21 is 200 + 5 x 21 = 305. Adding the Quarter 1 seasonal variation gives 305 + (-12) = 293. The 317 option wrongly reverses the sign of the variation. 288 results from using x = 20 (300 - 12), and 305 ignores the seasonal variation.

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