A regression model was fit to quarterly sales data for a small company. The esti

Question

A regression model was fit to quarterly sales data for a small company. The estimated regression equation is:

Sales = 140 - 41.5Q1 - 31.2Q2 - 52.0Q3, where Q1, Q2, and Q3 are quarters 1, 2, and 3, respectively. Answer the following questions based on this estimated regression equation. Note that to simplify the model the trend/time component is omitted.

a. Which quarter has the most negative effect on sales?

b. What are the forecasted sales for the second quarter of the next year?

c. What are the forecasted sales for the fourth quarter of the next year?

Explanation / Answer

Part-a

Third quarter as it has the most negative value

Part-b

For this Q1=0, Q2=1 and Q3=0

So, Forecast=140-41.5*0-31.2*1-52.0*0=108.8

Part-c

Here Q1=q2=q3=0 so that forecaste=140

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