(PAPER 2) 3.3.1 quantitative sales forecasting

Question 1

4 components that a business wants to identify in time series data

Answer 1

• trend (upwards, downwards, constant)
• seasonal fluctuations (time of year)
• cyclical fluctuations (related to the economy and the business cycle)
• random fluctuations (unknown reasons)

Question 2

calculating a 3 period moving average

Answer 2

add up every 3 pieces of data and divide by three to find the average. the answer goes in the mid point of years
for example: 61+59+66= 186
186/3

Question 3

why would a business be interested in using quantitative sales forecasting as a decision making technique?

Answer 3

to attempt to increase the accuracy of predictions. as the future is uncertain, businesses will aim to forecast sales so that they can meet demand and plan stock and staffing levels.

Question 4

calculating a 4 quarter average

Answer 4

4 quarter moving averages are used when a business is seasonal so the data can be smoothed out across the year
add up every 4 piece of data-
e.g. for 2010-2013 61+59+66+73= 259. put this in the 4 point total in 2011
2011-2014 59+66+73+69= 267

calculate the 8 point total by adding two 4 point totals together. e.g. adding together 2010-2013 and 2011-2014 259+267= 526
divide the total by 8 (526/8= 65.75) to get the 4 period moving average
ANSWER: 65.75

Question 5

why do businesses calculate moving average?

Answer 5

to smooth out the raw data to make it easier to spot the trend line

Question 6

extrapolation definition

Answer 6

extending the line of best fit to predict future sales figures

Question 7

formula to calculate variation

Answer 7

actual data- trend data

Question 8

why would a business calculate variation

Answer 8

as variation looks at the difference between the actual data and the trend data, it is used in an attempt to make the forecasting more accurate

Question 9

limitations of quantitative sales forecast

Answer 9

• past performance is no guarantee of future performance ( because a business needs to appreciate changing internal and external factors)
• lack of history makes it difficult to make an accurate prediction or inexperience of the forecaster

Question 10

advantages of quantitative sales forecast

Answer 10

allows the business to increase the accuracy of predictions through the use of moving averages and variations. as the future is uncertain, businesses will aim to predict sales to meet demand as well as plan for staffing and stock levels