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Inventory Forecasting in Accounting

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Inventory Forecasting

Businesses will often use past performance for different times of the year as an indicator for the forthcoming months. In many businesses there are likely to be patterns; some times of year where demand for their goods increases, and other times when it decreases. When a business has historical data forecasting may be undertaken using the past results as a guide to the potential future demand.
The first stage of forecasting is to create an index using the existing data. The data is provided on a monthly basis, so the forecast can be created on a monthly basis. The data over the four year period provided is placed into a table, which can be used to assess the average for that each month, as shown in table 1.
Table SEQ Table * ARABIC 1; Monthly Average Inventory
Month
Year 1
Year 2
Year 3
Year 4
Average
1
18,000
45,100
59,800
35,500
39,600
2
19,800
46,530
30,740
51,250
37,080
3
15,700
22,100
47,800
34,400
30,000
4
53,600
41,350
73,890
68,000
59,210
5
83,200
46,000
60,200
68,100
64,375
6
72,900
41,800
55,200
61,100
57,750
7
55,200
39,800
32,180
62,300
47,370
8
57,350
64,100
38,600
66,500
56,638
9
15,400
47,600
25,020
31,400
29,855
10
27,700
43,050
51,300
36,500
39,638
11
21,400
39,300
31,790
16,800
27,323
12
17,100
10,300
31,100
18,900
19,350
Avg.
38,113
40,586
44,802
45,896
42,349
With the average calculated, each month's actual use may be calculated as a

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