ACCA Applied Knowledge · Management Accounting · Summarising and analysing data
A multiplicative model is used for monthly demand. The trend for next month is forecast at 2,000 units and the seasonal index for that month is 0.85. What is the seasonally adjusted forecast of demand?
The forecast is 1,700 units. In a multiplicative model the trend is multiplied by the seasonal index, so 2,000 times 0.85 equals 1,700. The index below 1 shows that the month is normally 15% below the trend level.
- A2,353
- B1,700Correct
- C1,999.15
- D2,000.85
Explanation
With a multiplicative model, forecast = trend × seasonal index = 2,000 × 0.85 = 1,700. Dividing by 0.85 gives 2,353, which is how actual data is deseasonalised, not how a forecast is made. The other options wrongly add or subtract the index.
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