Question

Suppose that the unadjusted seasonal factor for the month of April is 1.10. The sum of the 12 months' unadjusted seasonal factor values is 12.18. The normalized (adjusted) seasonal factor value for April is?
Larger than 1.1
Smaller than 1.1
Equal to 1.1
Cannot be determined with the information provided

Answer 1

Smaller than 1.1

Answer 2

Answer 3

The normalized (adjusted) seasonal factor value for April is 1.0837. Hence, it is smaller than 1.0

Answer 4

Concepts and reason

The Seasonal factor is the periodic fluctuations of constant length that is usually caused by known factors and the ratio of the number of cases favourable for the event to the number of total outcomes possible in an equal probable sample space.

Fundamentals

The formula for the unadjusted factor is,

$\left( \begin{array}{l}\\{\rm{Unadjusted seasonal }}\\\\{\rm{factor for each month}}\\\end{array} \right) = \frac{{\left( \begin{array}{l}\\{\rm{Sum of all month }}\\\\{\rm{unadjusted factor values}}\\\end{array} \right)}}{{{\rm{Number of months}}}}$

The unadjusted seasonal factor for the month of April is 1.10.

The sum of 12 months unadjusted factor value for each month is,

$\begin{array}{c}\\\left( \begin{array}{l}\\{\rm{Unadjusted seasonal }}\\\\{\rm{factor for each month}}\\\end{array} \right) = \frac{{\left( \begin{array}{l}\\{\rm{Sum of all month }}\\\\{\rm{unadjusted factor values}}\\\end{array} \right)}}{{{\rm{Number of months}}}}\\\\ = \frac{{12.18}}{{12}}\\\\ = 1.015\\\end{array}$

Calculate the normalized seasonal factor.

$\begin{array}{c}\\\left( \begin{array}{l}\\{\rm{Normalized }}\\\\{\rm{Seasonal factor}}\\\end{array} \right) = \frac{{\left( \begin{array}{l}\\{\rm{Unadjusted seasonal factor }}\\\\{\rm{for the month of April}}\\\end{array} \right)}}{{\left( \begin{array}{l}\\{\rm{Unadjusted seasonal factor }}\\\\{\rm{for each month}}\\\end{array} \right)}}\\\\ = \frac{{1.10}}{{1.015}}\\\\ = 1.083744\\\\ = 1.08{\rm{ }}\left( {{\rm{Round to 2 decimal place}}} \right)\\\end{array}$

Ans:

The normalized seasonal factor is 1.08