Discussion
Table given below gives the Estimated and Actual Sales Revenue and Cost Figures for three years.
| Sales Revenue | 2007 | 2008 | 2009 | Cost | 2007 | 2008 | 2009 |
|---|---|---|---|---|---|---|---|
| Estimated | 1281 | 1452 | 1228 | Estimated | 986 | 1051 | 1024 |
| Actual | 1326 | 1286 | 1452 | Actual | 988 | 1076 | 1068 |
Estimated Profit = Estimated Revenue - Estimated Cost
Actual Profit = Actual Revenue - Actual Cost
A measure of forecasting done by marketing team is the ratio of Estimated Sales to Actual Sales. Lower is this value, better is the forecasting. Which years forecasting is the best?
Answer: C
The best forecasting year is 2009.
The measure is estimated sales divided by actual sales, and the question defines the lower value as the better forecast.
\[ \begin{aligned} 2007 &: 1281 \div 1326 \approx 0.966 \\ 2008 &: 1452 \div 1286 \approx 1.129 \\ 2009 &: 1228 \div 1452 \approx 0.846 \end{aligned} \]
2009 gives the lowest ratio, 0.846. 2008 is the worst by this rule, since the estimate exceeded actual sales. 2007 has the ratio closest to 1, which would be the most accurate forecast in ordinary terms, but the question's own rule says lower is better, so the data are enough and 'Cannot be determined' is wrong.
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