The planning department of a small manufacturing firm developed the following tr
ID: 3258931 • Letter: T
Question
The planning department of a small manufacturing firm developed the following trend equation to estimate annual sales of its product, in thousands of units. Eight years of sales data were used to generate the trend equation.
Sales = 5.0 + 3T, where T = time in years. Sales are seasonal with the following seasonal factors for each quarter: Q1 = 80; Q2 = 90; Q3 = 110 and Q4 = 120.
Predict annual sales for next year (T = 9).
Forecast sales for each of the four quarters, based on the annual forecast and the seasonal factors.
Explanation / Answer
Sales = 5 + 3T
Putting T=9
Sales = 5 + 3x9
=> 32
Hence annual sale ofre next year = 32
If we look at the previous data, the sales are divided aa 8:9:11:12 among the quaters
So sales in each quater = total sales x ratio of quater
1st quater(Q1) = 32 x 8/40. => 6.4
Q2 = 32 x 9/40. => 7.2
Q3 = 32 x 11/40 => 8.8
Q4 = 32 x 12/40 => 9.6