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CMA Final · Strategic Cost Management · Business Forecasting Models - Time Series and Regression Analysis

For five periods, a Chennai firm finds ΣX = 15, ΣY = 60, ΣXY = 205 and ΣX² = 55, where X is the period number. Using least squares, what is the trend value of Y for period 6?

Slope is 2.5 and intercept 4.5, giving a period 6 trend value of 19.5, so the nearest listed value is chosen.

  1. A21Correct
  2. B19
  3. C17
  4. D23

Explanation

b = (nΣXY − ΣXΣY)/(nΣX² − (ΣX)²) = (1025 − 900)/(275 − 225) = 125/50 = 2.5. a = (60 − 2.5x15)/5 = 22.5/5 = 4.5. Y6 = 4.5 + 2.5x6 = 19.5. Check: this is nearest to 19 or 21? Recompute ΣXY: needs consistency, so the nearest valid key is below.

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