Manuel Gutierrez correctly predicted the increasing need for home health care services due to the country€™s aging population. Five years ago, he started a company offering meal delivery, physical therapy, and minor housekeeping services in the Galveston area. Since that time, he has opened offices in seven additional Gulf State cities. Manuel is currently analyzing the revenue data from his first location for the first five years of operation.

a. Plot these data. Based on your visual observations, what time-series components are present in the data?
b. Determine the seasonal index for each month.
c. (1) Fit a linear trend model to the deseasonalized data for the years 2005€“2009 and determine the MAD and MSE for forecasts for each of the months in 2010. (2) Conduct a test of hypothesis to determine if the linear trend model fits the existing data. (3) Comment on the adequacy of the linear trend model based on the measures of forecast error and the hypothesis test you conducted.
d. Manuel had hoped to reach $2,000,000 in revenue by the time he had been in business for 10 years. From the results in part c, is this a feasible goal based on the historical data provided? Consider and comment on the size of the standard error for this prediction. What makes this value so large? How does it affect your conclusion?
e. Use the seasonal index values computed in part b to provide seasonal adjusted forecasts for each month of the year 2010.

Transcribed Image Text:

Revenue ($10,000s) 2007 72 2006 2008 76 75 2005 2009 67 January Fcbruary 34 63 March April Ma June July August September 67 October November December 45 48 64 81 86 75 80 75 49 60 72 75 86 87 91 78 87 89