Module 18 - Forecasting

Question 1

What is the typical sequence of budget creation?

Answer 1

1. Sales budget
2. Production Budget
3. Overheads Budget
4. Research and Development Budget
5. Administrative Budget
6. Master Budget - containing p/l, b/s, cash.

Question 2

What is the most important technique for companies when creating forecasts:

Answer 2

Statistical Trend Analysis

Question 3

What is the graph of a time series called?

Answer 3

Histogram

• output/ sales/ costs over a time frame

Question 4

What are the main features of a time series?

Answer 4

1. A trend
2. Seasonal Variations
3. Cyclical Variations
4. Random Variations

Question 5

Give an example of a cyclical variation and describe some of their characteristics.

Answer 5

Caused by circumstances which are usually cyclical in nature.

They are commonly associated with economic cycles such as booms and slumps lasting a few years.

Question 6

What are the components of a time series and what is the equation?

Answer 6

Y = T + S

Y= the actual time series

T = the trend component

S= Seasonal Component

Question 7

When carrying out a Time Series Forecasting what is the additive model?

The additive model is used to calculated crude seasonal variation.

Answer 7

Additive model is the Actual sales minus the trend sales.

CSV = Actual - Trend

Question 8

What is the multiplicative method for calculating seasonal variation?

Answer 8

It is when the actual sales are taken as a proportion of the trend.

CSV = Actual / Trend