ACCA Applied Knowledge · Management Accounting · Analytical techniques in budgeting and forecasting
In a multiplicative model with four quarters, the seasonal indices for Quarters 1 to 3 are 0.80, 1.20 and 1.10. Actual sales in Quarter 4 were $18,360. What are the seasonally adjusted sales for Quarter 4?
Seasonally adjusted sales are $20,400. Four quarterly multiplicative indices must total 4, so Quarter 4 is 0.90. Deseasonalising means dividing actual sales of $18,360 by the index, giving $20,400. Multiplying by the index, or using another quarter's index, gives incorrect figures.
- A$16,524
- B$16,691
- C$20,400Correct
- D$22,950
Explanation
Multiplicative seasonal indices must sum to 4, so the Quarter 4 index is 4 - (0.80 + 1.20 + 1.10) = 0.90. Seasonally adjusted sales = 18,360 / 0.90 = $20,400. $16,524 multiplies by 0.90 instead of dividing. $16,691 uses the Quarter 3 index of 1.10, and $22,950 uses the Quarter 1 index of 0.80.
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