Example Of Essay On Sales Forecasting And Budgeting

Simple moving average.

In this method data for all the previous years is used with an equal weight of one assigned to each of the data. The summation of the weights for all the years will therefore be 10. The 2010 sales estimate using this method will therefore be:
2010 forecast=900+1400+1750+1900+1700+1500+2000+1950+2250+230010=1765010=1765

The 2010 sales estimate is 1765

Thus the sales forecast for year 2010 using this method is 1765.
3-Year weighted average.
The sum of the weights = 3+2+1 = 6.

Thus using this method the 2010 sales estimate:

2010 forecast=2300×3+2250×2+1950×16=2225

The 2010 sales estimate is 2225.

5- Year weighted average.
The sum of the weights = 5+4+3+2+1 = 15
2010 sales estimate by this method is calculated as
2010 forecast=2300×5+2250×4+1950×3+2000×2+1500×115=2123.33

Thus the 2010 sales estimate using this method is 2123.

3-year exponentially smoothed weighted average.
In this method a smoothing factor α is used to exponentially reduce the data for years 2009,2008 and 2007. If the smoothing factors are taken to be o.3, o.25, 0.2 for years 2009,2008 and 2009 respectively, the 2010 sales estimate can be calculated as follows;
2010 forecast=2300×0.3+0.25×2250+0.2×1950=1642.5

5-year exponentially smoothed weighted average.

In exponential smoothing the data of the previous years is reduced exponentially by some factor. In this case the factors used are o.1, o.15, 0.2, 0.25, and 0.3 with the highest weight given to the latest data.
2010 Forecast=2300×0.3+0.25×2250+0.2×1950+0.15×2000+0.1×1500=2092.5
Most Accurate forecasting method