- 20 Marks
IMAC – NOV 2023 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis
Determine the trend and seasonal variation in sales using moving averages and calculate factors for estimating direct material costs.
Question
a) A company operates from Monday to Friday. Sales data for the most recent three weeks as well as the moving total are as follows:
| Day | Sales | Moving Total |
|---|---|---|
| Day 1 | 78 | |
| Day 2 | 83 | |
| Day 3 | 89 | 420 |
| Day 4 | 85 | 430 |
| Day 5 | 85 | 440 |
| Day 6 | 88 | 450 |
| Day 7 | 93 | 460 |
| Day 8 | 99 | 470 |
| Day 9 | 95 | 480 |
| Day 10 | 95 | 490 |
| Day 11 | 98 | 500 |
| Day 12 | 103 | 510 |
| Day 13 | 109 | 520 |
| Day 14 | 105 | |
| Day 15 | 105 |
Required:
i) State the length of the cycle. (2 marks)
ii) Using the moving averages, establish the trend of the historical data above. (6 marks)
iii) Calculate the seasonal variation for each day of the week. (7 marks)
b) The value of variances as a control technique for management depends on the reliability and accuracy of the standard costs. If the standard costs are inaccurate, comparisons between actual cost and standard cost will have no meaning.
Required:
Explain TWO (2) factors to be considered by the purchasing department in estimating the direct material costs per unit of raw material. (5 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Direct Material Costs, Moving Averages, Sales Forecasting, Seasonal Variation
- Level: Level 1
- Topic: Forecasting, Standard Costing and Variance Analysis
- Series: NOV 2023