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Case Problem 1 Forecasting Sales

This document summarizes a case study on forecasting sales for a company. It includes: 1) A time series graph of monthly sales data from months 1-40. 2) An analysis of seasonality in the sales data, showing seasonal indices for each month. 3) A deseasonalized time series with a trend line fitted to make forecasts. 4) Sales forecasts for Year 4 made using the trend line equation and seasonal indices for each month, totaling $298,424. 5) The forecast error was only $3,424 compared to the actual sales of $295,000, showing a very accurate forecast.

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88 views

Case Problem 1 Forecasting Sales

This document summarizes a case study on forecasting sales for a company. It includes: 1) A time series graph of monthly sales data from months 1-40. 2) An analysis of seasonality in the sales data, showing seasonal indices for each month. 3) A deseasonalized time series with a trend line fitted to make forecasts. 4) Sales forecasts for Year 4 made using the trend line equation and seasonal indices for each month, totaling $298,424. 5) The forecast error was only $3,424 compared to the actual sales of $295,000, showing a very accurate forecast.

Uploaded by

Something Chic
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Case Problem 1: Forecasting Sales

1. Month 1 corresponds to January for year 1, month 2 corresponds to February for year 1, and so on. A
graph of the time series is shown below:

300

250

200
Sales

150

100

50
0 5 10 15 20 25 30 35 40

Month

2. Analysis of seasonality:

Seasonal-Irregular
Month Component Values Seasonal Index January
1.445 1.441 1.44
February 1.301 1.297 1.30
March 1.344 1.343 1.34
April 1.047 1.034 1.04
May 1.044 1.054 1.05 June .779 .801 .80
July .882 .834 .83
August .857 .848 .85 September .618 .638 .63
October .725 .675 .70
November .843 .862 .85
December 1.137 1.180 1.16

Chapter 15
The deseasonalized time series is shown below:

t Deseasonalized Sales t Deseasonalized Sales

1 168.06 19 189.16
2 180.77 20 189.41
3 173.13 21 193.65
4 171.15 22 185.71
5 175.24 23 196.47
6 175.00 24 198.28
7 174.70 25 195.83
8 178.82 26 196.15
9 174.60 27 197.76
10 185.71 28 197.12
11 178.82 29 200.00
12 177.59 30 200.00
13 182.64 31 200.00
14 183.08 32 204.71
15 184.33 33 200.00
16 185.58 34 211.43
17 183.81 35 203.53
18 186.25 36 202.59

The trend line fitted to the deseasonalized time series is

T t = 169.499 + 1.02 t

3. Sales forecasts

Forecast for Year 4

Using T t = 169.499 + 1.02 t

Trend Seasonal Monthly Month Forecast Index Forecast

January 207.239 1.44 298.424


February 208.259 1.30 270.737
March 209.279 1.34 280.434
April 210.299 1.04 218.711
May 211.319 1.05 221.885
June 212.339 .80 169.871
July 213.359 .83 177.088
August 214.379 .85 182.222 September 215.399 .63 135.701
October 216.419 .70 151.493
November 217.439 .85 184.823
December 218.459 1.16 253.194
4. Forecast error = $295,000 - $298,424 = -$3,424

The forecast we developed over predicted by $3,424; this represents a very small error.

5. The analysis can be easily updated each month, especially if a computer software package is used
to perform the analysis.

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