13 In our discussion of Winter’s method, a monthly seasonality of (say) 0.80 for January means that during January, air conditioner sales are expected to be 80% of the sales during an average month. An alternative approach to modeling seasonality is to let the seasonality factor for each month represent how far above average air conditioner sales will be during the current month. For instance, if sJan

50, then air conditioner sales during January are expected to be 50 less than air conditioner sales during an average month. If sJuly 90, then air conditioner sales during July are expected to be 90 more than air conditioner sales during an average month. Let st = the seasonality for month t after month t demand is observed Lt =the estimate of base after month t demand is observed Tt = the estimate of trend after month t demand is observed Then the Winter’s method equations given in the text are modified to be as follows (* indicates multiplication):

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La (I) + (1 - a)*(L-1+ T-1) TB (L, L-1) + (1B) T-1 = = sy (II) + (1 - y) * St-12 a What should I and II be? b Suppose that month 13 is a January, L12 = 30, Tik -3, s =-50, and $2 -20. Let a = y = B=0.5. Suppose 12 air conditioners are sold during month 13. At the end of month 13, what is the predic- tion for air conditioner sales during month 14?