You are given the following budgeted and actual data for the Grey Company for each of the months January through June of the current year. In December of the prior year, sales were forecasted as follows: January, 100 units February, 95 units March, 102 units April, 107 units May, 114 units June, 122 units.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
You are given the following budgeted and actual data for the Grey Company for each of the months January through June of the current year.
In December of the prior year, sales were forecasted as follows:
- January, 100 units
- February, 95 units
- March, 102 units
- April, 107 units
- May, 114 units
- June, 122 units.
In January of the current year, sales for the months February through June were reforecasted as follows:
- February, 90 units
- March, 102 units
- April, 102 units
- May, 104 units
- June, 117 units.
In February of the current year, sales for the months March through June were reforecasted as follows:
- March, 97 units
- April, 102 units
- May, 99 units
- June, 117 units
In March of the current year, sales for the months April through June were reforecasted as follows:
- April, 102 units
- May, 94 units
- June, 107 units
In April of the current year, sales for the months May and June were reforecasted as follows:
- May, 84 units
- June, 102 units
In May of the current year, sales for June were reforecasted as 102 units.
Actual sales for the six-month period, January through June, were as follows: January, 96 units; February, 90 units; March, 105 units; April, 103 units; May, 120 units; June, 118 units.
Required:
- Prepare a schedule of forecasted sales, on a rolling basis, for the months January through June, inclusive. (Hint: There will be only one forecasted number for January—this is the
forecast done in December. For February, there will be two forecasts: one done in December and a second done in January. For June, there will be six forecasts, one done in each of the preceding six months.) - For each of the months March through June, determine the 3-month forecast error rate, defined as 1 minus the absolute percentage error. For example, the forecast error rate for March’s sales is found by dividing the absolute value of the forecast error for this month by the actual sales volume for the month. The forecast error for any month (e.g., March) is defined as the difference between the actual sales volume for the month and the sales volume for that month forecasted 3 months earlier (e.g., December). Also, indicate for each month whether the actual sales volume was above or below the forecasted volume generated three months earlier
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