PEV - June 2007 exam paper

aimeexox Registered Posts: 38 Regular contributor ⭐
Can someone help me please? I don't understand task 1.2 at all. I know its similiar to unit 6 but I can't remember any of it and costing goes right over my head :(!

I don't understand why you dont just take the cost and add/minus the seasonal variation?!


  • Rinske
    Rinske Registered Posts: 2,453 Beyond epic contributor 🧙‍♂️
    Products are bought and sold for a certain price. Due to seasonal variations, the price per month can change.
    The underlying trend shows how much is the actual costs and a possible increase in trend.

    The question gives you the current prices and the seasonal variations.

    In order to come to the underlying trend, you remove the seasonal variations from the actual prices.

    The actual price consists of the underlying trend + the seasonal variations. So in order to get to the underlying trend you deduct the seasonal variations from the actual prices.

    In this instance the May 06 actual price is 1,000. The seasonal variation is 200, so the underlying trend is that the price is 800 per 1,000kg. For July the variation is -100 and the actual price 700, so the underlying trend is 700 minus minus 100 (aka 700 plus 100) is 800.

    The second part deals with the percentage increase. If the original price is 800 and the increased price is 850. The increase is 50. The percentage increase is then 50 divided by 800 times 100 to get to the percentage.

    The third part deals with the variations again. You got the new price (850) you got the seasonal variations, instead of removing, you now add them and that's what the expected prices are.

    Does this help?
  • sdv
    sdv Registered Posts: 585 Epic contributor 🐘
    aimeexox wrote: »
    I don't understand why you dont just take the cost and add/minus the seasonal variation?!

    This question is all about TRENDS and Future Costs forecasts

    We see trends and future forecasts every day on TV! Weather forecasts.

    Generally we know that in summer the weather will be hot, and in winter the weather will be cold.

    We can also work out that the average temperature on 27th may will be say 22 degrees. This figure has arrived at by gathering temperature data for 27th May over number of years.

    Based on the past data it would be reasonable to assume that the next 27th of May 2011 the temperature will be 22 degrees. (TREND)

    However, we can't say this for absolutely certain. Past experience has suggested that the temperature can be 24 degrees.

    This gives us a possible divergence of 2 degrees (SEASONAL VARIENCE) from the expected temperature of 22 degrees (TREND)

    Now that we are hearing of GLOBAL warming................. a prediction has been made that the temperature tempture of 27th may will be 25 degrees in future.

    Using the seasonal variance from the past experience we can safely predict that the tempture in future can be between 25 and 27 degrees.

    Task 1.2 is all about predicting the FUTURE costs based on TREND, and SEASONAL VARIATION.

    I hope the above analogy makes sense!
  • aimeexox
    aimeexox Registered Posts: 38 Regular contributor ⭐
    Thank you so much both of you!!! Looks like I need to dig out my unit 6 book!!! Thanks again :)
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