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SEASONAL INDICES

A seasonal index is a measure of how a particular season compares with the


average season.
Consider the monthly seasonal indices for unemployment given in the table
below:
Seasonal indices are calculated so that their average is 1. This means that
the sum of the seasonal indices equals the number of seasons. Thus, if the
seasons are months, the seasonal indices add to 12. If the seasons are quarters,
then the seasonal indices would add to 4, and so on. January has seasonal index
of 1.1which means, Januarys unemployment is 10% above average.
Septembers unemployment is 15% less than average.
Deseasonalising is the process that is used to remove the seasonal effects
from a set of data. This allows any underline trend to be made clearer.
We can use seasonal indices to deseasonalise time series. To calculate
deseasonalised data, each entry is divided by its seasonal index as follows.
Deseasonalising data
Example: Deseasonalise the quarterly sales gures of Summer Year1 using the
data and seasonal indices tables below.
Solution: Deseasonalised data for Summer 1 = Summer 1 data = 920 =
893
Summer seasonal index 1.03
Calculating seasonal indices
Example: Mikki runs a shop and she wishes to determine quarterl seasonal
indi!es
based on her last years sales, which are shown in the table below.
Solution: Using the above formula to find the seasonal index
seasonal index = "alue of t#e quarter
quarter a"era$e
Find the quarter average
quarter a"era$e = 920 % 108& % 12'1 % ''( = 923
'
Find the seasonal index of each season
seasonal index Summer = 920 = 0.99)
923
seasonal index *utumn = 108& = 1.1)(
923
seasonal index +inter = 12'1 = 1.3'&
923
seasonal index Sprin$ = ''( = 0.'83
923
Calculating seasonal indices (several years data)
Suppose that Mikki has in fact three years of data, as shown. Use the data to
calculate seasonal indices, correct to two decimal places.
Solution: ,#e seasonal a"era$e of ear 1 -as found pre"iousl
Find the quarter average for year 2
quarter a"era$e ear 2 = 103& % 1180 % 13&( % &'1 = 1028
'
Find the seasonal index of each season
seasonal index Summer = 103& = 1.00)
1028
seasonal index *utumn = 1180 = 1.1'8
1028
seasonal index +inter = 13&( = 1. 319
1028
seasonal index Sprin$ = &'1 = 0.&2(
1028
Find the quarter average for year 3
quarter a"era$e ear 2 = 1299 % 132' % 1'&0 % (&9 = 1183
'
Find the seasonal index of each season
seasonal index Summer = 1299 =1.098
1183
seasonal index *utumn = 132' = 1.119
1183
seasonal index +inter = 1'&0 = 1.22(
1183
seasonal index Sprin$ = (&9 = 0.&&)
1183
,o find t#e seasonal indi!es of t#e 3 ears -e need to find t#e a"era$e seasonal
index of ea!# season.
QUESTIONS
1 The table below shows the monthly sales gures and seasonal indices (for January to
November) for a product produced by the U-beaut company.
a Complete the table by calculating the missing seasonal index.
b Interpret the seasonal index for
i February
ii August
2 The table below shows the quarterly newspaper sales of a corner store for Year 1. Also
shown are the seasonal indices for newspaper sales for the rst, second and third quarters.
Complete the table.

3 Each of the following data sets records monthly sales ($000s). Use the data to determine
the seasonal indices for the 12 months. Give your results cor rect to two decimal places.
Check that your seasonal indices add to 12.
4 The number of waiters employed by a restaurant chain in each quarter of one year, along
with some seasonal indices which have been calculated from the previous years data, are
given in the following table.

a What is the seasonal index for the second quarter?
b The seasonal index for Quarter 1 is 1.30. Explain what this mean in terms of the average
quarterly number of waiters.
c Deseasonalise the data.
5 The following table shows the number of students enrolled in a 3-month computer systems
training course along with some seasonal indices which have been calculated from the
previous years enrolment gures. Complete the table by calculating the seasonal index for
spring and the deseasonalised student numbers for each course.
6 The following table shows the monthly sales gures and seasonal indices (for January to
December) for a product produced by the VMAX company.
a Complete the table by:
i calculating the missing seasonal index
ii evaluating the deseasonalised sales gures
b The seasonal index for July is 0.90. Explain what this means in terms of the average
monthly sales.
ANSWERS
1a 1.0
bi In general, in February, monthly sales are 30% more than in an average month.
Ii In general, in August, monthly sales are 30% less than in an average month.
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b In Quarter1therestaurantchainemploys30% more waiters than the number employed in
an average quarter.
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c In July the VMAX company records 10% fewer sales than in an average month.