Forecasting sales can be a difficult topic for many people involved in the budgeting process. The problem demonstration provided for you this week will focus on quantitative forecasting methods.
Sales Forecasting
Forecasting sales can be a difficult topic for many people involved in the budgeting process. The problem demonstration provided for you this week will focus on quantitative forecasting methods. Hopefully, this step-by-step presentation of various techniques will help you develop your own skills.
It is suggested that you view this problem demonstration before attempting to do this week’s homework. Enjoy the demonstration!
Sales Forecasting (Links to an external site.)
Transcript
Overhead Variance Analysis
Variance analysis is often a difficult topic for accounting students. However, by breaking the variance topic into small segments, the material becomes more manageable. Try to focus on what is being isolated when calculating each variance: price, rate, usage, mix, etc. This will help you understand these useful concepts.
To help you gain the necessary skills to complete this week’s problems, you have been provided with a problem demonstration involving the overhead variance analysis.
It is suggested that you view this problem demonstration before attempting to do this week’s homework. Enjoy the demonstration!
Overhead Variance Analysis (Links to an external site.)
Transcript
Practice Problems Activity
To further help with this week’s homework assignment, here is a document with practice problems (Links to an external site.) and chart for the sample problems (Links to an external site.).
Scenario: Sales Forecasting
The Gregory Corporation has gathered information regarding past sales of plastic silverware.
Year
Sales
20X2
$450,000
20X3
$385,000
20X4
$495,000
20X5
$720,000
20X6
$680,000
20X7
$590,000
20X8
$620,000
Assignment Details
Important!
It is expected that the assignment will be completed using an Excel spreadsheet using formulas.
Answer the following questions.
Predict the sales for 20X9 using the moving average method.
You noticed a sudden jump in sales for 20X5. After inquiring about this jump, you were notified by your manager about a one-time sale for $250,000 in that year that is not likely to be repeated. What revision, if any, would you make in the sales information used for projection?
If you revised your historical sales to be used to project 20X9 sales, please recalculate your projection using the moving average method.
Which projection (Question 1 or Question 3) do you feel is more representative of the Gregory Corporation’s historical sales? Why?
Please complete the remaining questions using the revised historical data.
Predict the 20X9 sales using exponential smoothing.
Predict the 20X9 using a trend line technique using (GROWTH function in Excel).
Predict the sales for 20X9 using a graphing technique.
It has been suggested that sales for the company may be connected to disposable income. Using the information below regarding historical disposable income, predict the sales for 20X9 using regression analysis if a reliable prediction for disposable income for 20X9 is $45,720.
Year
Sales
20X2
$36,200
20X3
$37,140
20X4
$38,120
20X5
$38,450
20X6
$41,190
20X7
$43,220
20X8
$42,850
Which method do you think provides the most realistic sales projections for 20X9? Why?
Submit your Excel spreadsheet with its formulas to the Week 2 Homework Submission page.
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