The planning department of a small manufacturing firm developed the following tr

Question

The planning department of a small manufacturing firm developed the following trend equation to estimate annual sales of its product, in thousands of units. Eight years of sales data were used to generate the trend equation.Sales = 5.0 + 3T, where T = time in years. Sales are seasonal with the following seasonal factors for each quarter: Q1 = 80; Q2 = 90; Q3 = 110 and Q4 = 120.  

a. Predict annual sales for next year (T = 9).

b. Forecast sales for each of the four quarters, based on the annual forecast and the seasonal factors.

Explanation / Answer

Answer:

The planning department of a small manufacturing firm developed the following trend equation to estimate annual sales of its product, in thousands of units. Eight years of sales data were used to generate the trend equation.Sales = 5.0 + 3T, where T = time in years. Sales are seasonal with the following seasonal factors for each quarter: Q1 = 80; Q2 = 90; Q3 = 110 and Q4 = 120.  

a. Predict annual sales for next year (T = 9).

Predicted sales = 5.0+3*9 =32 (in thousands).

b. Forecast sales for each of the four quarters, based on the annual forecast and the seasonal factors.

Forecast for Q1 = 32*80/(4*100) =6.4(in thousands).

Forecast for Q2 = 32*90/(4*100) =7.2(in thousands).

Forecast for Q3 = 32*110/(4*100) =8.8(in thousands).

Forecast for Q4 = 32*120/(4*100 )=9.6(in thousands).

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.