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Essay Unit 7 P3 Management Accounting
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This is an elaboration of unit 7 management accounting p3
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P3. Use accounting data and statistical information to measure businessperformance.
1. Give an explanation of what is meant with historical data.
Historical data is accounting data that previously has been recorded in accounting
periods concerning different business aspects. Such as, sales, debtors, production
costs etc. Historical data is used to predict a forecast of future trends of these
different business aspects.
o Historical sales data
Historical sales data gives insights in the total amount of products that
were sold, when they were sold and to whom they were sold. Customer
profiles can be build when you look at the amount sold, when and to
whom. These customer profiles give you insights in the development of
customer demand. If there is a pattern in the development of customer
demand, this can mean the sales data can be a reliable source and can be
used as a stable basis to predict future sales.
o Historical production data
There needs to be an understanding that there is a positive correlation
between sales and production. This means that when sales increase, total
production costs will also increase. As I said before sales data can be used
as a reliable source to predict future sales. When this is the case it will
probably also be possible to predict the level of production and therefor the
total production costs. There is on the other hand something that is harder
to predict then total production costs and that is machine downtime. That is
why the machine downtime needs to be recorded closely to determine if
there is a pattern in the timing and frequency of the machine downfall to
occur. Finding out the timing and frequency of the downfall can help an
organisation to better manage its physical resources.
o Historical debtors data
Lastly we have historical debtors data. Debtors date gives insights in a
business’s ability to collect payments from debtors within the prearranged
credit terms. This data gives insights if there is an increase or decrease of
defaulters when historical debtors data from previous financial years are
considered and compared. When these historical debtors data is compared
it can cause the business’s to change their payment policies.
2. Explain in depth what moving averages are.
A moving average is an average that is calculated on stock prices over a
preestablished data sample that keeps moving, because the older prices are dropped
each time and a new price period becomes available. What the moving average is
based on are past stock prices and because of that it can not warn you in advance,
but it can confirm when a trend change is happening.
Stock prices of an item can move up and down. In fast moving markets it is likely to
see that the stock price of an item will shoot up, only moments later will fall down and
then shoot up again. This will increase the potential for false signals and because of
that it may be misleading in detecting trends. There are a couple of purposes of the
Name, Class, Student no, date , BTEC Nationals in Business, Unit 27 Understanding Health and Safety in the
Business Workplace 2019-2020
1
, moving average. One purpose is to identify trends and confirm reversals and another
purpose is to take away the noise of random price movements and smooth it out to
result in seeing the average price value.
3. Based on the table plot a three month moving average.
Month Stock price Moving average
January €21,05 X
February €21,90 X
March €22,15 (21,05 + 21,90 + 22,15) =
65, = €21,70
April €26,00 (21,90 + 22,15 + 26,00) =
70, = €23,35
May €27,00 (22,15 + 26,00 + 27,00) =
75, = €25,05
June €27,50 (26,00 + 27,00 + 27,50) =
80, = €26,83
July €27,05 (27,00 + 27,50 + 27,05) =
81, = €27,18
August €23,10 (27,50 + 27,05 + 23,10) =
77, = €25,88
September €21,00 (27,05 + 23,10 + 21,00) =
71, = €23,72
October €19,00 (23,10 + 21,00 + 19,00) =
63, = €21,03
November €18,00 (21,00 + 19,00 + 18,00) =
58, = €19,33
December €17,50 (19,00 + 18,00 + 17,50) =
54, = €18,17
4. Explain in what way the moving average is used to detect trends.
The moving average is used to make random price movements smooth and to see
the average value of price. The moving average is the most reliable, because stock
prices keep increasing or decreasing. If a market is moving fast stock prices can
suddenly increase tremendously, but also decrease moments later. When this
happens false trends are detected. If we take a look at the chart you see the first
upper purple circle. This circle shows a negative trend reversal, this means that the
stock price is below the moving average. In this situation a business needs to sell
their stock. If we look at the second purple circle you see a positive trend reversal.
This is the opposite of a negative trend reversal. The stock price is above the moving
average and with this a business can buy stock. A positive trend reversal can point
out to be a trend.
Name, Class, Student no, date , BTEC Nationals in Business, Unit 27 Understanding Health and Safety in the
Business Workplace 2019-2020
2
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