National Scan Inc sells ratio frequency inventory tags Month

National Scan, Inc., sells ratio frequency inventory tags. Monthly sales for a 6-month period were as follows:

Month:

Sales

Feb

50

Mar

52

Apr

54

May

54

Jun

59

Jul

65

Use an appropriate forecasting method to prepare forecast Sales.


a) The May forecast by using the appropriate forecasting method is ________ (in 4 decimal places).


b) The August forecast by using the appropriate forecasting method is ________ (in 4 decimal places).


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Solution

We will use Linear Regression equation using least square method as appropriate forecasting method.

As per above,

Y = a + b.X

Where,

X ( independent variable ) = Serial number of month ( 1 for Feb, 2 for Mar, 3 For April, 4 for May, 5 for June, 6 for July and 7 or Aug)

Y ( Dependent variable ) = Forecasted value of sales

A, B = Constants

We place values of months and sales as provided in the problem in 2 successive columns in excel and apply the formula LINEST ( ) and get following values of A and B :

A= 46.0666

B = 2.7428

Thus , the linear regression equation is :

Y = 46.0666 + 2.7428.X

The May forecast accordingly will be ( Put X = 4 ) = 46.0666 + 2.7428 x 4 = 46.0666 + 10.9712 = 57.0378

The August forecast accordingly will be ( Put Y = 7 ) = 46.0666 + 2.7428 x 7 = 46.0666 + 19.1996 = 65.2662