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 was determined that years 2013 and 2014 were "stale"?
A)$1,900,000
B)$2,500,000
C)$2,833,333
D)$3,000,000

Question

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 was determined that years 2013 and 2014 were "stale"? 
A)$1,900,000 
B)$2,500,000 
C)$2,833,333 
D)$3,000,000

Quizplus · Accepted Answer

The average approach involves taking the average of the previous sales figures to forecast the next year's sales. If we are to exclude years 2013 and 2014 as "stale," we would only consider the sales figures of 2010, 2011, 2012, 2015, and 2016.

Total sales figures from 2010-2016= $15,200,000

Average sales for remaining 5 years (excluding 2013 and 2014) = $15,200,000/5 = $3,040,000

Therefore, the forecast for next year's sales using the average approach would be $3,040,000 or approximately $2,833,333 rounded to the nearest dollar.

Thus, the correct answer is C.

Suppose a Firm Has Had the Historical Sales Figures Shown