Barbara Lynch is the product manager for a line of skiwear produced by HeathCo Industries and privately branded for sale under several different names, including Northern Slopes and Jacque Monri. A new part of Ms. Lynch's job is to provide a quarterly forecast of sales for the northern United States, a region composed of 27 states stretching from Maine to Washington. A 10-year sales history is shown:

a. Because Ms. Lynch has so many other job responsibilities, she has hired you to help with the forecasting effort. First, she would like you to prepare a time-series plot of the data and to write her a memo indicating what the plot appears to show and whether it seems likely that a simple linear trend would be useful in preparing forecasts.

b. In addition to plotting the data over time, you should estimate the least-squares trend line in the form:

SALES = a + b (TIME)

Set TIME = 1 for 1994 Q1 through TIME = 40 for 2003 Q4. Write the trend equation:

SALES = ______ +/- ______(TIME)

(Circle + or – as appropriate)

c. Do your regression results indicate to you that there is a significant trend to the data? Explain why or why not.

d. On the basis of your results, prepare a forecast for the four quarters of 2008.

e. A year later, Barbara gives you a call and tells you that the actual sales for the four quarters of 2008 were: Ql = 334,271, Q2 = 328,982, Q3 = 317, 921, and Q4 = 350,118. How accurate was your model? What was the root-mean-squared error?

Transcribed Image Text:

Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1st Quarter $ 72,962 145,592 153,907 176,076 202,415 174,200 253,142 257,156 289,321 313,769 Sales (5000) 2nd Quarter $81,921 117,129 100,144 180,440 211,780 182,556 218,755 202,568 266,095 315,011 3rd Quarter $ 97,729 114,159 123,242 162,665 163,710 198,990 225,422 224,482 262,938 264,939 4th Quarter $ 142,161 151,402 128,497 220,818 200,135 243,700 253,653 229,879 322,052 301,479