Trevor Harty, an avid mountain biker, always wanted to start a business selling top-of-the-line mountain bikes and other outdoor supplies. A little over 6 years ago, he and a silent partner opened a store called Hale and Harty Trail Bikes and Supplies. Growth was rapid in the first 2 years, but since that time, growth in sales has slowed a bit, as expected. The quarterly sales (in $1,000s) for the past 4 years are shown in the table below:

(a) Develop a trend line using the data in the table.
Use this to forecast sales for each quarter of year 5.

What does the slope of this line indicate?

(b) Use the multiplicative decomposition model to incorporate both trend and seasonal components into the forecast. What does the slope of this line indicate?

(c) Compare the slope of the trend line in part (a)

to the slope in the trend line for the decomposition model that was based on the deseasonalized sales figures. Discuss why these are so different and explain which is the better one to use.

Transcribed Image Text:

QUARTER YEAR 1 YEAR 2 YEAR 3 YEAR 4 1 274 282 282 296 23 172 178 182 210 130 136 134 158 4 162 168 170 182