CMA Intermediate · Financial Management and Business Data Analytics · Data Analysis and Modelling
For five months, a Chennai firm's sales (₹ lakh) were 20, 24, 28, 32, 36 in months 1 to 5. A least-squares trend line Y = a + bX is fitted with X = 1, 2, 3, 4, 5. What is the forecast for month 7?
The forecast for month 7 is ₹44 lakh. The sales rise by a constant ₹4 lakh a month, giving slope 4 and intercept 16 from the means. Substituting X = 7 gives 16 plus 28, which equals 44.
- A₹44 lakhCorrect
- B₹40 lakh
- C₹48 lakh
- D₹42 lakh
Explanation
The data rise by exactly 4 each month, so b = 4. Mean X = 3 and mean Y = 28, so a = 28 − 4×3 = 16. Month 7: 16 + 4×7 = 44. Check: month 5 is 36, so month 7 is 36 + 8 = 44. Option 40 is the month 6 forecast, wrongly used.
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