Assume monthly sales (12 months/yr) are recorded for 7 years. Data has seasonali

Question

Assume monthly sales (12 months/yr) are recorded for 7 years. Data has seasonality and trend. Trend equation was computed using total annual sales as the dependent variable (Y). The independent variable (X) used in creating the trend equation was Time (i.e., years 1 to 7). • Trend equation computed is: Y = 1200 + 28*Time. • We also found monthly seasonal factors. The seasonal factor for August is 0.13. Forecast sales for August of year 10. Round up to the next integer A. 193 B. 1,480 C. 182 D. 1,228

Explanation / Answer

Trend equation computed is: Y = 1200 + 28 * Time.

Deseasonalized Forecast value for year 10 Month august = 1200 + 28 * 10 = 1480

Seasonal Factor for August = 0.13

Forecast sales for August of year 10 = 1480 * 0.13 = 192.4 or say 193

Option A is correct.

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