CPIM Practice Exam

What will the forecast for next year's first quarter be if the deseasonalized demand forecast is 500 units and the first quarter seasonal index is 1.25?

1. 100 units

2. 156 units

3. 178 units

4. 625 units

The correct answer is: 156 units

To determine the forecast for next year's first quarter, you start with the deseasonalized demand forecast, which is 500 units in this case. Then, you need to adjust this forecast by the seasonal index for the first quarter. The seasonal index reflects how much above or below the average demand is expected during a specific period due to seasonal fluctuations. The process to find the forecast is as follows: 1. The deseasonalized forecast is multiplied by the seasonal index. 2. Here, the first quarter seasonal index is 1.25, meaning that demand in the first quarter is expected to be 25% higher than the average deseasonalized forecast. 3. So, the calculation will look like this: Forecast for first quarter = Deseasonalized demand forecast × Seasonal index Forecast for first quarter = 500 units × 1.25 4. When you perform the calculation: 500 × 1.25 = 625 units. This indicates that the forecast for the first quarter next year is 625 units, reflecting the seasonal increase in demand. The choices presented do not align correctly with this calculation; 625 units is the accurate forecast based on the given deseasonalized demand