Suppose a firm has had the historical sales figures shown below. What would be the forecast for next year's sales using the average approach if it is determined that 2007 is a "stale" year?
A) $400,000
B) $580,000
C) $625,000
D) $700,000

Question

Suppose a firm has had the historical sales figures shown below. What would be the forecast for next year's sales using the average approach if it is determined that 2007 is a "stale" year? 
A) $400,000 
B) $580,000 
C) $625,000 
D) $700,000

Quizplus · Accepted Answer

To use the average approach, we simply add up all of the valid years (in this case, 2003-2006 and 2008-2010) and divide by the number of valid years.

Total sales for valid years: $3,125,000
Number of valid years: 7

Average sales for valid years: $446,429

Since we know that 2007 is a "stale" year and should not be included in the forecast, we would simply use the average of the valid years. Therefore, the forecast for next year's sales would be:

Forecast sales for next year: $446,429

Of the answer choices given, only option C is close to this value.

Suppose a Firm Has Had the Historical Sales Figures Shown