Given the following sales data a Compute the seasonal index

Given the following sales data: (a) Compute the seasonal index for each quarter. (b) Suppose we expect year 3 to have annual demand of 880. What is the forecast value for each quarter in year 3?

Solution

Seasonal index = value of quarter/ Quarter average

Overall Average = (120+146+160+152+210+190+155+147)/8 = 160
So, for quarter 1,
Average = (120+146)/2= 133

For Quarter 1, seasonal index = 133/160 = 0.83

For quarter 2,
Average = (160+152)/2 = 156
For Quarter 2, seasonal index = 156/160 = 0.97

For quarter 3,
Average = (210+190)/2 = 200
seasonal index = 200/160 = 1.25

For quarter 4,
Average = (155+147)/2 = 151
seasonal index = 155/151 = 0.94

b.) If annual demand is 880,
Forecast values will be,
For Quarter 1, 880*0.83 = 730.4
For Quarter 2, 880 *0.97 = 853.6
For Quarter 3, 880 * 1.25 = 1100
For Quarter 4, 880 *0.94 = 827.2