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ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control

Karolis Co forecasts sales using a linear time-series trend, y = 8,000 + 400x, where y is monthly sales units and x is the month number (month 1 = January). Seasonal variations are additive. The seasonal adjustment for November is -600 units. What is the forecast sales for November (month 11)?

The November forecast is 11,800 units. The trend value for month 11 is 12,400 units, and the additive seasonal variation of minus 600 units is then applied to reduce it, giving 11,800.

  1. A11,800Correct
  2. B12,400
  3. C13,000
  4. D7,800

Explanation

Trend at x = 11 is 8,000 + (400 x 11) = 12,400. Adding the additive seasonal variation of -600 gives 11,800. The 12,400 option omits the seasonal adjustment, and 13,000 applies the sign incorrectly.

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