Problem 311 A manager of a store that sells and installs spa

Problem 3-11 A manager of a store that sells and installs spas wants to prepare a forecast for January, February, and March of next year. Her forecasts are a combination of trend and seasonality. She uses the following equation to estimate the trend component of monthly demand: Ft = 60 + 3t where t= 0 in June of last year. Seasonal relatives are 85 for January, 110 for February, and .93 for March, what demands should she predict? (Round your answers to 2 decimal places.) Month anuary of the next year February of the next year March of the next year Forecast

Solution

Given:

Calculations;

Yt=60+3t

t=0 for june of last year

t=1 for july of last year.........

t=7 for jan of this year

t=8 for feb of this year

t=9 for march of this year.......

t=19 for jan of next year

t=20 for feb of next year

t=21 for mar of next year

From the above you will get;

Forecast for trend for each of the periods as

Forecast= (trend) *(seasonal relative)

Now you can plug in the values and obtain the forecast for the three periods.

Ex: Forecast for Jan=Yjan*seasonal relative = 117* 0.85=99.45 and so on