CMA Intermediate · Management Accounting · Forecasting, Budgeting and Budgetary Control
A Nashik firm fits a least squares line Y = a + bX to quarterly sales, where X is the quarter number. It finds a = 400 units and b = 25 units. Using this trend line, what is the forecast for quarter 9?
The forecast is 625 units. Substituting quarter 9 into the trend line gives 400 + 25 x 9 = 625. Forgetting the intercept would give 225, and using quarter 8 would give 600.
- A625 unitsCorrect
- B600 units
- C650 units
- D225 units
Explanation
Y = 400 + 25 x 9 = 400 + 225 = 625 units. The option 225 is only the b x X part, with intercept omitted. The option 600 uses X = 8.
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