CS Executive · Corporate Accounting and Financial Management · Forecasting Financial Statements
Sales of Kaveri Traders for the last three years were Rs 40 lakh, Rs 44 lakh and Rs 48 lakh. Using a simple three-year moving average, what is the forecast sales for next year?
The forecast is Rs 44 lakh. A simple three-year moving average adds the three years' sales, 40, 44 and 48 lakh, giving 132 lakh, and divides by three. Using the last year's figure or the total without dividing would be incorrect.
- ARs 48 lakh
- BRs 44 lakhCorrect
- CRs 46 lakh
- DRs 132 lakh
Explanation
Moving average = (40 + 44 + 48) / 3 = 132 / 3 = Rs 44 lakh. Rs 48 lakh is just the last year's sales, ignoring averaging. Rs 132 lakh is the total, with the division missed.
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