Suppose a firm has had the historical sales figures shown as follows.What would be the forecast for next year's sales using the average approach if it is determined that 2011 is a "stale" year?

Question

Quizplus · Accepted Answer

To use the average approach we need to calculate the average of the non-stale years' sales figures.

Average sales = (200,000+300,000+500,000+700,000+800,000)/5 = 500,000

Therefore, the forecast for next year's sales using the average approach would be $500,000. However, the question specifies that 2011 is a "stale" year, meaning it is not representative of future sales trends. Therefore, we need to exclude it from the calculation.

New average sales = (200,000+300,000+500,000+800,000)/4 = 625,000

The forecast for next year's sales using the average approach considering only the non-stale years would be $625,000, making option C the correct answer.

Suppose a Firm Has Had the Historical Sales Figures Shown