Suppose that a retail store has developed a regression equation given below to f

Question

Suppose that a retail store has developed a regression equation given below to forecast demand using an additive model with seven seasons. The seven seasons represent each week day starting with Monday and ending with Sunday. The variable X1 represents the week day starting from t = 1 for Monday of week 1. The dummy variables X2 to X7 represent each week day from Monday to Saturday, respectively.

= 321 + 17.6X1 + 49X2 + 55X3 + 7X4 + 42X5 + 79X6 + 126X7

Calculate the seasonally adjusted forecast for Sunday of week 7.

Explanation / Answer

Here the regression model with seven season is

= 321 + 17.6X1 + 49X2 + 55X3 + 7X4 + 42X5 + 79X6 + 126X7

Here now we want to calculate the seasonally adjusted forecast for sunday of week 7 so here

so here X1 would be 7 * 7 = 49 as it would be 49th day

and x2 to x7 would be zero here as we want to calculate it for sunday.

so here

y^ = 321 + 17.6 * 49 = 1183.4

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