Now we compare the actual sales to the moving average to see how much the specific season deviated from the norm. The formula is:
Move down one period and average the next four.
For monthly data, the period is 12. For quarterly, it is 4. how to calculate seasonal variation
Calculating seasonal variation helps you separate predictable cycles from general trends. Businesses use it to plan inventory, while economists use it to understand employment shifts. To find these patterns, you generally use the Ratio-to-Moving-Average method. Understand the Components
Elena calculated: Last year's total = $70k + $25k + $12k + $35k = $142,000. Plus 10% growth = $142,000 × 1.10 = total for next year. Now we compare the actual sales to the
"Aha!" Elena shouted. "Summer is almost double the average! Winter is only one-third!"
Here is the process in a nutshell:
Elena stared at the napkin. "Last year, I guessed and got stuck with 200 pounds of unsold peppermint bark. This year, I'll know exactly how much to order."