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CMA Foundation · Fundamentals of Business Mathematics and Statistics · Index Numbers and Time Series

Under the multiplicative model Y = T × S × C × I, the trend value for a month is ₹80,000 and the seasonal index is 125%. Cyclical and irregular effects are taken as neutral (100%). What is the expected sales for that month?

Expected sales are ₹1,00,000. In the multiplicative model, the trend is multiplied by the seasonal index, so 80,000 times 1.25 gives 1,00,000, since the cyclical and irregular components are neutral at 100 percent.

  1. A₹80,000
  2. B₹1,00,000Correct
  3. C₹64,000
  4. D₹1,25,000

Explanation

Expected Y = 80,000 × 1.25 × 1 × 1 = ₹1,00,000. ₹64,000 results from dividing by 1.25, which is used for deseasonalising, not forecasting. ₹80,000 ignores the seasonal effect.

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