University of Central Florida (UCF) QMB3200 Quantitative Business Tools II Final Practice Exam

A seasonal index is a measure that indicates the relative strength or weakness of sales during a specific season compared to the average trend. When a seasonal index is calculated to be 0.80, it implies that the sales during that season are 80% of the average trend level.

In other words, a seasonal index of 0.80 means that the sales average for that particular season is 20% lower than what is typically expected based on the trend estimate. This is derived from the formula where the index indicates how much sales differ from the trend; an index of 1 would indicate that sales are at the trend level, while an index of less than 1 (like 0.80) signifies underperformance compared to the trend. Hence, if the index is at 0.80, the correct interpretation is that the sales average is 20% below the trend estimate.