Tucson Machinery. Inc, manufactures numerically controlled machines, which sell

Question

Tucson Machinery. Inc, manufactures numerically controlled machines, which sell for an average price of $0.5 million each. Sales for these NCMs for the past two years were as follows: Use a. Find the equation of a simple regression line using Excel. (Round your answer to 3 decimal places.) y = N/4 + n/r b. Compute trend and seasonal factor from a linear regression line obtained with Excel. (Do not round intermediate calculations. Round your answers to 3 decimal places.) c. Forecast sales for next year using the above seasonal factors. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Explanation / Answer

Calculation of seasonal index calculation is given below

For calculation of the Trend line

the table is given below

Let say linear trend line equation y = a + bt

a = [(y) (t2 ) - (t) (yt)]/ [ n (t2 ) - (t)2 ]

a = [(190 * 204 - 36 * 885)/ (8* 204 - 362 )] = 6900/336 = 20.54

b =  [ n(yt) - (t)((y)]/ [ n (t2 ) - (t)2 ]

b= [8 * 885 - 36*190)/ (8* 204 - 362 )] = 240/336 = 0.714

so y = 20.54 + 0.714t

so answer of question a is here.

(b) The table for trend forecast and seasonal factors which is calculated above is given below.

c. Forecast sales for next year using seasonal index

FIrst we will find the trend values

Multiplying trend values with seasonal indexes we get following resuslts

year 1 2 Quarter 1 17 16 2 23 29 3 31 33 4 21 20 Total 92 98 Average 23 24.5 Year 1 2 Seasonal Index Quarter 1 0.7391 0.6531 0.6961 2 1.0000 1.1837 1.0918 3 1.3478 1.3469 1.3474 4 0.9130 0.8163 0.8647 Total 4 Average 1

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