CMA Foundation · Fundamentals of Business Mathematics and Statistics · Index Numbers and Time Series
Under the multiplicative model, the trend value of a company's sales for a quarter is ₹800 lakh and the seasonal index for that quarter is 115. Ignoring cyclical and irregular variations, what is the expected sales for that quarter?
Expected sales are ₹920 lakh. In the multiplicative time series model the trend value is multiplied by the seasonal index as a fraction, so 800 times 1.15 equals 920. Adding 115 or dividing by 1.15 applies the wrong operation.
- A₹920 lakhCorrect
- B₹915 lakh
- C₹696 lakh
- D₹800 lakh
Explanation
In the multiplicative model, Y = T × S/100 = 800 × 1.15 = ₹920 lakh. Adding 115 to 800 (₹915 lakh) treats the index as an additive amount. Dividing by 1.15 gives about ₹696 lakh, which is the deseasonalising operation, not forecasting.
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