# Sales revenue forecast

DaleB91
Registered Posts:

**3**
Can somebody please clarify for me how to calculate the answer to the following question:

Year 1 Actual Year 2 Actual Year 3 Actual Year 4 Actual Year 5 Forecast

Sales Revenue: 12200 12474 13527 14091 ??

Sales price index: 110.0 114.0 120.0 124.0 130.0

Sales Revenue @ yr1 prices: ?? ?? ?? ??

1) Use sales price index to calculate sales revenue for years 1 to 4 at year 1 prices

2) Project the sales revenue at year 1 prices forward to year 5

3) Calculate the year 5 sales revenue forecast

Year 1 Actual Year 2 Actual Year 3 Actual Year 4 Actual Year 5 Forecast

Sales Revenue: 12200 12474 13527 14091 ??

Sales price index: 110.0 114.0 120.0 124.0 130.0

Sales Revenue @ yr1 prices: ?? ?? ?? ??

1) Use sales price index to calculate sales revenue for years 1 to 4 at year 1 prices

2) Project the sales revenue at year 1 prices forward to year 5

3) Calculate the year 5 sales revenue forecast

0

## Comments

645The other two parts look like they need more information, is that the full question? There's no obvious trend to calculate yr 5 revenues so assume you must be given more figures.

312,034I think CeeJaySix has given a clear explanation. I'll use it but put the numbers from the task into an example. I hope this will help you.

I think the Sales Revenue for year 2 given by DaleB91should be £12,747 and not £12,474. This explanation is based on that assumption.

£12,747 divided by 114.0 = 111.82 and then multiply by 110.0 =£12,300

This gives us the following sales revenues at year 1 pricesYear.................Sales Revenue

- ................£12,200

- ................£12,300

- ................£12,400

- ................£12,500

This shows an increase of £100 each year. So we can project that the year 5 Sales Revenue will be £12,500 + £100 = £12,600 at year 1 prices.As we know the forecast sales price index for year is 130.0 we can use this to find the year 5 sales revenue [at year 5 prices] forecast.

Year 1index sales revenue divided by year 1 index x year 5 sales price index = year 5 sales revenue

for year 5

£12,600 .................divided by 110.0 ......................x..................... 130.0 ......................= £14,891The bold calculation is intended to line up with the word based formula above

I hope this is a help for EvaP and any other reader

I don't look at the forum everyday, so if you would like any further assistance or clarification you can contact me by email or look at my website

Yours

Sandy

[email protected]

www.sandyhood.com

[email protected]

www.sandyhood.com