Forecasting

True or False: Concepts

1. The top management uses the forecast as a tool for making long-range planning and capital budgeting decisions,
implementing long-range strategic objectives, and as a basis for performance targets.
2. The purchasing manager uses the forecast to determine the amount of raw materials needed in the production,
the budget, the schedule of production activities, and the inventory levels to be maintained.
3. The production manager utilizes the forecast to determine the bulk or volume of materials that should be
purchased for a particular period.
4. Production makes use of forecasting to determine how much sales should be met in a particular period and to
plan promotional and advertising activities for the products.
5. Under the least-squares regression method of cost, estimation relies on one dependent variable and one
independent variable only.
6. Qualitative forecast is the same as a judgmental forecast.
7. Under qualitative forecasting, expert opinion is difficult to use.
8. In the regression analysis, the variable that is being predicted is known as the dependent variable.
9. Time series forecasting predicts on the assumption that the past is a function of the future.
10. In analyzing time series, breaking down past data into trend, seasonal, cycle, and random variation is not
necessarily required.

Multiple Choice: Concepts

1. The common advantages of using the naïve model are
I. It is cheap to develop.
II. It does not require any software or machine.
a. I
b. II
c. I and II
d. neither of the two
2. Which of the following is not a type of qualitative forecasting method?
a. sales force polling
b. consumer market survey
c. PERT-derived forecast
d. moving average
3. Which of the following is not a type of time series method of quantitative forecasting?
a. naive model
b. moving average
c. weighted moving average
d. regression analysis
4. It is a pattern of data that occurs every several years.
a. Cycle
b. Seasonality
c. Trend
d. Random variations
5. These are "blips" in the data caused by chance and unusual situations
a. Cycle
b. Seasonality
c. Trend
d. Random variations
6. The simplest way to forecast is to assume that demand in the next period will be equal to the demand in the most
recent period.
a. naïve model
b. weighted moving average
c. exponential smoothing
d. trend projections
7. Which of the following forecasting tools is/are under the associative method?
I. exponential smoothing
 II. trend projection
III. regression analysis
a. l and II
b. II and III
c. I, II, and III
d. III
8. Which of the following statements is/are true regarding the naïve model of forecasting?
I. It does not attempt to explain casual relationships with the forecasted variable.
II. A drastic change in the variable for forecasting is not captured.
a. Statement I is true.
b. Statements l and II are true.
c. Statement II is true.
d. Statements I and II are false.
9. The formula for exponential smoothing is:

a. 𝛼𝑌𝑜𝑙𝑑 + (1 − 𝛼)𝑌′𝑜𝑙𝑑
b. 𝑎 + 𝑏𝑥
𝛴𝑦 2 −𝑎𝛴𝑦−𝑏𝛴𝑥𝑦
c.
𝑛−2
[𝐷𝑡 +𝐷𝑡−1 +...+𝐷𝑡−𝑛+1 ]
d. 𝑛
10. The formula for linear regression model is:

a. 𝛼𝑌𝑜𝑙𝑑 + (1 − 𝛼)𝑌′𝑜𝑙𝑑
b. 𝑎 + 𝑏𝑥
𝛴𝑦 2 −𝑎𝛴𝑦−𝑏𝛴𝑥𝑦
c. 𝑛−2
[𝐷𝑡 +𝐷𝑡−1 +...+𝐷𝑡−𝑛+1 ]
d. 𝑛
Financial Planning & Budgeting
Multiple Choice: Concepts
1. Which of the following is correct concerning a budget?
a. It can serve as a substitute for management.
b. It is a written statement of the management's plans for a specific future time period.
c. It is required for all business operations.
d. It is used only by manufacturing companies.
2. To which management function is budgeting most closely related?
a. motivating
b. controlling
c. planning
d. directing
3. Which budget provides the information needed to prepare the direct labor budget?
a. income budget
b. production budget
c. materials budget
d. sales budget
4. Which of the following is an operating budget?
a. cash budget
b. sales budget
c. budgeted balance sheet
d. capital expenditure budget
5. Which of the following sets includes only financial budgets?
a. cash budget and operating budget
b. sales budget and budgeted balance sheet
c. budgeted balance sheet and cash budget
d. cash budget and sales budget
6. What information/pieces of information is/are found on the direct materials budget?
I. How many units of direct materials should be purchased?
II. How much is the cost of direct materials to be purchased?
a. I only
b. II only
c. both I and II
d. neither I nor II
7. What is the starting point in preparing a master budget?
a. production budget
b. sales budget
c. direct labor budget
d. purchases budget
8. Which of the following is a source of information used to prepare the budgeted income statement?
a. cash budget
b. budgeted balance sheet
c. capital expenditures budget
d. selling and administrative expense budget
9. Why is the sales budget the single most important source in preparing budgets?
a. All the other budgets depend on it.
b. It enables the company to determine the unit cost of products.
c. It is the best determiner of the profitability of a company.
d. It is the only budget that requires estimates.
10. Which of the following sections appears on a cash budget?
a. expenses
b. financing
c. revenues
 d. sales
11. Which of the following is calculated on a direct labor budget?
a. number of employees needed
b. cost per finished goods unit for labor
c. cost per employee for each unit produced
d. total required direct labor hours
12. Which of the following is used by a merchandiser?
a. production budgets
b. manufacturing budgets
c. material purchases budgets
d. merchandise purchases budget
13. Which of the following is the correct formula for determining budgeted merchandise purchases?
a. budgeted sales + desired ending inventory - beginning inventory
b. budgeted production - sales + beginning inventory - desired ending inventory
c. budgeted sales - cost of goods sold + desired ending inventory - beginning inventory
d. budgeted sales - cost of goods sold + beginning inventory desired ending inventory
14. What is the last step in developing the master budget?
a. preparing the budgeted balance sheet
b. preparing the cost of goods manufactured budget
c. preparing the budgeted income statement
d. preparing the cash budget
15. Which of the following is one of the main purposes of preparing cash receipts and disbursements budget?
a. to find investment opportunities for anticipated surpluses
b. to reconcile cash on hand
c. to determine production needed
d. to determine how many units need to be sold
16. Skate Rink Company revised its sales budget to show a 15% increase in sales. As a result of this change, which other
budgets would change?
a. all of its other budgets
b. only its selling and administrative expenses budget
c. only its marketing budget
d. only its production budget
17. Which of the following is needed to prepare a production budget?
a. budgeted unit sales
b. budgeted raw materials to be purchased
c. beginning work in process units
d. estimated cost of goods sold
18. Which of the following is a financial budget?
a. capital expenditure budget
b. production budget
c. manufacturing overhead budget
d. sales budget
19. What do most companies do to start the budgeting process?
a. They estimate expected profits.
b. They look at past performance.
c. They look at the competitors plans.
d. None of the above
20. Which time period is the most common for budget periods?
a. one month
b. five years
c. one year
d. depends on the firm's objective
Midterm Output
1. Why is it important to forecast events?
a. For yourself
b. Commercial Business
c. Academic Institutions
d. Health & Safety Organizations
2. When you are planning an activity, how do you ‘forecast’ the results?
3. Why is budgeting important for
a. Personal expenses
b. Businesses
4. If you have P1,500 as your weekly allowance, how would your budget look like? (Present it in a table format)