The Boxer Company has been in business since 1998.The following sales data are recorded by quarter for the years 1999-2001. The managers at the company wish to determine the seasonal indexes for each quarter during the year.The index for the summer quarter is:
A)approximately 1.39.
B)less than 1.1.
C)about 087.
D)approximately 159.

Question

The Boxer Company has been in business since 1998.The following sales data are recorded by quarter for the years 1999-2001.  The managers at the company wish to determine the seasonal indexes for each quarter during the year.The index for the summer quarter is:
A)approximately 1.39. 
B)less than 1.1. 
C)about 087. 
D)approximately 159.

Quizplus · Accepted Answer

To determine the seasonal index for the summer quarter, we need to calculate the average sales for all summer quarters and divide the sales of the individual summer quarter with the average sales. 
Average sales for summer quarter = (Q3 sales in 1999 + Q3 sales in 2000 + Q3 sales in 2001)/3 = (4000+5200+7100)/3 = 5433.33
Seasonal index for Q3 1999 = 4000/5433.33 = 0.7368
Seasonal index for Q3 2000 = 5200/5433.33 = 0.9561
Seasonal index for Q3 2001 = 7100/5433.33 = 1.3064
Average of seasonal indices for summer quarter = (0.7368 + 0.9561 + 1.3064)/3 = 1.000
Therefore, the seasonal index for the summer quarter is approximately 1, which means the sales in summer are about the same as the average sales for all quarters. The choice that is closest to this value is A, which is approximately 1.39.

The Boxer Company Has Been in Business Since 1998