CMA Intermediate · Management Accounting · Forecasting, Budgeting and Budgetary Control
A Pune firm uses a 3-period simple moving average to forecast monthly demand. Sales for the last three months were 120, 150 and 180 units. What is the forecast for the next month?
The forecast is 150 units. A 3-period simple moving average adds the last three months' sales (120, 150 and 180 giving 450) and divides by three. Using only two months would give 165, and 450 is just the total, not the average.
- A135 units
- B150 unitsCorrect
- C165 units
- D450 units
Explanation
Three-period simple moving average = (120+150+180)/3 = 450/3 = 150 units. The figure 450 is the unaveraged total. The option 165 is the average of only the last two months, (150+180)/2.
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