Analytical Techniques in Budgeting and Forecasting

Question 1

P.281 - What is ‘r’?

Answer 1

• Correlation Coefficient
• +1 = perfect positive
• 0 = no correlation
• -1 = perfect negative
• +/-0.8 = strong correlation

Question 2

P.284 - Coefficient of determination

Answer 2

= r^2

Measures proportion of changes in y that can be explained by changes in x

Question 3

P.286 - How to extrapolate inconsistent trend in moving average

Answer 3

Average = (Last known trend - First known trend) ÷ (no. data sets - 1)

Question 4

P.297 - What are chain based index numbers?

Answer 4

Where index number is calculated using previous year as a base, rather than one base year for all indexes.

Question 5

P.300 - Laspeyre index numbers

Answer 5

Price Index
= SUM(Current year price × Base year quantity) ÷ SUM(Base year price × Base year quantity) × 100

Quantity Index
= SUM(Current year quantity × Base year price) ÷ SUM(Base year quantity × Base year price) × 100

Question 6

P.302 - Paasche index numbers

Answer 6

Price Index
= SUM(Current year price × Current year quantity) ÷ SUM(Base year price × Current year quantity) × 100

Quantity Index
= SUM(Current year quantity × Current year price) ÷ SUM(Base year quantity × Current year price) × 100