Chapter 6

Forecasting
Learning Objectives
1.

Understand that the long-run success of an organization is often closely related to how well
management is able to predict future aspects of the operation.

2.

Know the various components of a time series.

3.

Be able to use smoothing techniques such as moving averages and exponential smoothing.

4.

Be able to use the least squares method to identify the trend component of a time series.

5.

Understand how the classical time series model can be used to explain the pattern or behavior of the
data in a time series and to develop a forecast for the time series.

6.

Be able to determine and use seasonal indexes for a time series.

7.

Know how regression models can be used in forecasting.

8.

Know the definition of the following terms:

time series
forecast
trend component
cyclical component
seasonal component
irregular component

mean squared error

moving averages
weighted moving averages
smoothing constant
seasonal index

6-1

Chapter 6

Solutions:
1.

a.
Month

Time-Series
Value

3-Month Moving
Average Forecast

1
2
3
4
5
6
7
8
9
10
11
12

9.5
9.3
9.4
9.6
9.8
9.7
9.8
10.5
9.9
9.7
9.6
9.6

9.40
9.43
9.60
9.70
9.77
10.00
10.07
10.03
9.73

(Error)2

0.04
0.14
0.01
0.01
0.53
0.01
0.14
0.18
0.02
1.08

4-Month Moving
Average Forecast

(Error)2

9.45
9.53
9.63
9.73
9.95
9.98
9.97
9.92

0.12
0.03
0.03
0.59
0.00
0.08
0.14
0.10
1.09

MSE(3-Month) = 1.08 / 9 = .12

MSE(4-Month) = 1.09 / 8 = .14
Use 3-Month moving averages.

2.

b.

forecast = (9.7 + 9.6 + 9.6) / 3 = 9.63

c.

For the limited data provided, the 5-week moving average provides the smallest MSE.

a.

Week

Time-Series
Value

4-Week Moving
Average Forecast

1
2
3
4
5
6
7
8
9
10
11
12

17
21
19
23
18
16
20
18
22
20
15
22

20.00
20.25
19.00
19.25
18.00
19.00
20.00
18.75

b.

(Error)2

4.00
18.06
1.00
1.56
16.00
1.00
25.00
10.56
77.18

MSE(4-Week) = 77.18 / 8 = 9.65

MSE(5-Week) = 51.84 / 7 = 7.41

6-2

5-Week Moving
Average Forecast

19.60
19.40
19.20
19.00
18.80
19.20
19.00

(Error)2

12.96
0.36
1.44
9.00
1.44
17.64
9.00
51.84

Forecasting

c.
3.

For the limited data provided, the 5-week moving average provides the smallest MSE.

a.

b.

Week

Time-Series
Value

Weighted Moving
Average Forecast

Forecast
Error

1
2
3
4
5
6
7
8
9
10
11
12

17
21
19
23
18
16
20
18
22
20
15
22

19.33
21.33
19.83
17.83
18.33
18.33
20.33
20.33
17.83

3.67
-3.33
-3.83
2.17
-0.33
3.67
-0.33
-5.33
4.17

(Error)2

13.47
11.09
14.67
4.71
0.11
13.47
0.11
28.41
17.39
103.43

MSE = 103.43 / 9 = 11.49

Prefer the unweighted moving average here.

c.

You could always find a weighted moving average at least as good as the unweighted one. Actually
the unweighted moving average is a special case of the weighted ones where the weights are equal.

4.
Wee
k
1
2
3
4
5
6
7
8
9
10
11
12

Time-Series
Value

Forecast

Error

(Error)2

17
21
19
23
18
16
20
18
22
20
15
22

17.00
17.40
17.56
18.10
18.09
17.88
18.10
18.09
18.48
18.63
18.27

4.00
1.60
5.44
-0.10
-2.09
2.12
-0.10
3.91
1.52
-3.63
3.73

16.00
2.56
29.59
0.01
4.37
4.49
0.01
15.29
2.31
13.18
13.91
101.72

MSE = 101.72 / 11 = 9.25

= .2 provided a lower MSE; therefore = .2 is better than = .1

6-3

Chapter 6

5.

a.
Month

Yt

1
2
3
4
5
6
7
8
9
10
11
12

80
82
84
83
83
84
85
84
82
83
84
83

3-Month Moving
Averages Forecast

82.00
83.00
83.33
83.33
84.00
84.33
83.67
83.00
83.00

(Error)2

1.00
0.00
0.45
2.79
0.00
5.43
0.45
1.00
0.00
11.12

=2
Forecast
80.00
80.40
81.12
81.50
81.80
82.24
82.79
83.03
82.83
82.86
83.09

(Error)2
4.00
12.96
3.53
2.25
4.84
7.62
1.46
1.06
0.03
1.30
0.01
39.06

MSE(3-Month) = 11.12 / 9 = 1.24

MSE( = .2) = 39.06 / 11 = 3.55
Use 3-month moving averages.

6.

b.

(83 + 84 + 83) / 3 = 83.3

a.

F13 = .2Y12 + .16Y11 + .64(.2Y10 + .8F10) = .2Y12 + .16Y11 + .128Y10 + .512F10

F13 = .2Y12 + .16Y11 + .128Y10 + .512(.2Y9 + .8F9) = .2Y12 + .16Y11 + .128Y10 + .1024Y9 + .4096F9
F13 = .2Y12 + .16Y11 + .128Y10 + .1024Y9 + .4096(.2Y8 + .8F8) = .2Y12 + .16Y11 + .128Y10 + .1024Y9
+ .08192Y8 + .32768F8

b.

7.

The more recent data receives the greater weight or importance in determining the forecast. The
moving averages method weights the last n data values equally in determining the forecast.

a.
Month

Time-Series
Value

1
2
3
4
5
6
7
8
9
10
11
12

240
350
230
260
280
320
220
310
240
310
240
230

3-Month Moving
Average Forecast

273.33
280.00
256.67
286.67
273.33
283.33
256.67
286.67
263.33

6-4

(Error)2

= .2
Forecast

(Error)2

177.69
0.00
4010.69
4444.89
1344.69
1877.49
2844.09
2178.09
1110.89

240.00
262.00
255.60
256.48
261.18
272.95
262.36
271.89
265.51
274.41
267.53

12100.00
1024.00
19.36
553.19
3459.79
2803.70
2269.57
1016.97
1979.36
1184.05
1408.50

Forecasting

17,988.52

27,818.49

MSE(3-Month) = 17,988.52 / 9 = 1998.72

MSE( = .2) = 27,818.49 / 11 = 2528.95
Based on the above MSE values, the 3-month moving averages appears better. However,
exponential smoothing was penalized by including month 2 which was difficult for any method to
forecast. Using only the errors for months 4 to 12, the MSE for exponential smoothing is revised to
MSE( = .2) = 14,694.49 / 9 = 1632.72
Thus, exponential smoothing was better considering months 4 to 12.
b.

Using exponential smoothing,

F13 = Y12 + (1 - )F12 = .20(230) + .80(267.53) = 260

8.

a.
Day
1
2
3
4
5
6
7
8
9
10
11
12

Time-Series Value
14.45
15.75
16.45
17.40
17.32
15.96
16.45
15.60
15.09
16.42
16.21
15.22

5-Day Moving
Average Forecast

Forecast
Error

(Error)2

16.27
16.58
16.72
16.55
16.08
15.90
15.95

-0.31
-0.13
-1.12
-1.46
0.34
0.31
-0.73

0.10
0.02
1.25
2.12
0.11
0.09
0.54

Note: MSE = 4.23/7 = 0.60

Forecast for September 4 is (15.60 + 15.09 + 16.42 + 16.21 + 15.22)/5 = 15.71
b.

The weighted moving average forecasts for days 5-12 are 16.49, 17.01, 16.71, 16.57, 16.10, 15.60,
15.09, 16.42, 16.21 and 15.22
Note: MSE = 5.21/8 = 0.65
Forecast for September 4 is 0.1(15.09) + 0.2(16.42) + 0.3(16.21) + 0.4(15.22) = 15.74

c.

The exponential smoothing forecasts for days 2-12 are 14.45, 15.36, 16.12, 17.02, 17.23, 16.34,
16.42, 15.85, 15.32, 16.09 and 16.17
Note: MSE = 9.57/11 = 0.87
Forecast for September 4 is 0.7(15.22) + 0.3(16.17) = 15.51

6-5

Chapter 6

d.
Method
Moving Averages
Weighted Moving Average
Exponential Smoothing

MSE
0.60
0.65
0.87

Moving Averages is the best of the three approaches because it has the smallest MSE.
9.

Note: Results were obtained using the Forecasting module of The Management Scientist.
a.
Method
3-Quarter
4-Quarter

Forecast
80.73
80.55

MSE
2.53
2.81

The 3-quarter moving average forecast is better because it has the smallest MSE.
b.
Method
= .4
= .5

Forecast
80.40
80.57

MSE
2.40
2.01

The = .5 smoothing constant is better because it has the smallest MSE.

c.

The = .5 is better because it has the smallest MSE.

10. a.

Season
1991-1992
1992-1993
1993-1994
1994-1995
1995-1996
1996-1997
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002

Time-Series
Value
30.1
32.6
29.8
29.3
30.4
29.6
28.7
26.8
29.7
31.1
31.4
Totals:

= 0.1
Forecast

= 0.1
(Error)2

= 0.2
Forecast

= 0.2
(Error)2

30.10
30.35
30.30
30.20
30.22
30.15
30.01
29.69
29.69
29.83

6.2500
0.3025
0.9900
0.0418
0.3794
2.1151
10.2972
0.0001
1.9903
2.4640
24.8304

30.10
30.60
30.44
30.21
30.25
30.12
29.84
29.23
29.32
29.68

6.2500
0.6400
1.2996
0.0353
0.4220
2.0155
9.2157
0.2222
3.1582
2.9642
26.2228

Smoothing Constant
0.1
0.2

MSE
24.8304/10 = 2.48
26.2228/10 = 2.62

A smoothing constant of 0.1 is better.

6-6

Forecasting

b.

Using = 0.1
Forecast for 2002 - 2003 season = 0.1(31.4) + 0.9(29.83) = 29.99

11. a.
Time Series
Value
28.9
31.0
29.9
30.1
32.2
31.5
32.0
31.9
30.0

Period
1
2
3
4
5
6
7
8
9

= .2
Forecasts

= .3
Forecasts

= .4
Forecasts

29.80
30.04
30.01
30.03
30.46
30.67
30.94
31.13

29.80
30.16
30.08
30.09
30.72
30.95
31.27
31.46

29.80
30.28
30.13
30.12
30.95
31.17
31.50
31.66

MSE( = .2) = 1.40

MSE( = .3) = 1.27
MSE( = .4) = 1.23 = .4 provides the best forecast
Using = .4, F10 = .4(.30) + .6(31.66) = 31.00

b.
12.
t

Yt

Ft

Yt - Ft

(Yt - Ft)2

1
2
3
4
5
6
7
8
9
10
11
12

2,750
3,100
3,250
2,800
2,900
3,050
3,300
3,100
2,950
3,000
3,200
3,150

2,750.00
2,890.00
3,034.00
2,940.40
2,924.24
2,974.54
3,104.73
3,102.84
3,041.70
3,025.02
3,095.01

350.00
360.00
-234.00
-40.40
125.76
325.46
-4.73
-152.84
-41.70
174.98
54.99
Total

122,500.00
129,600.00
54,756.00
1,632.16
15,815.58
105,924.21
22.37
23,260.07
1,738.89
30,618.00
3,023.90
488,991.18

MSE = 488,991.18 / 11 = 44,453.74

Forecast for week 13:
F13 = 0.4(3,150) + 0.6(3,095.01) = 3,117.01

6-7

Chapter 6

13. a & b.

c.

Week

Time-Series
Value

= .2
Forecast

1
2
3
4
5
6
7
8
9
10

7.35
7.40
7.55
7.56
7.60
7.52
7.52
7.70
7.62
7.55

7.35
7.36
7.40
7.43
7.46
7.48
7.48
7.53
7.55

(Error)2

= .3
Forecast

.0025
.0361
.0256
.0289
.0036
.0016
.0484
.0081
.0000
.1548

7.35
7.36
7.42
7.46
7.50
7.51
7.51
7.57
7.58

(Error)2
.0025
.0361
.0196
.0196
.0004
.0001
.0361
.0025
.0009
.1178

MSE( = .2) = .1548 / 9 = .0172

MSE( = .3) = .1178 / 9 = .0131
Use = .3.
F11 = .3Y10 + .7F10 = .3(7.55) + .7(7.58) = 7.57

14.

The following values are needed to compute the slope and intercept:

t = 21

= 91

= 117.1

tY

= 403.7

Computation of slope:
b1 =

tY d
t Y i / n = 403.7 (21)(117.1) / 6 = 0.3514
91 (21) / 6
t d
ti / n
t

Computation of intercept:
b0 = Y b1 t = 19.5167 (0.3514)(3.5) = 20.7466

Equation for linear trend: Tt = 20.7466 - 0.3514t

Conclusion: enrollment appears to be decreasing by an average of approximately 351 students per
year.
15.

A linear trend model is not appropriate. A nonlinear model would provide a better approximation.

16. a.

A linear trend appears to be reasonable.

b.

The following values are needed to compute the slope and intercept:

= 36

= 204

Yt

= 223.8

6-8

t Y t = 1081.6

Forecasting

Computation of slope:
b1 =

tY d
t Y i / n = 10816. (36)(2238. ) / 8 = 17738
.
204 (36) / 8
t d
ti / n
t

Computation of intercept:
b0 = Y - b1 t = 27.975 - 1.7738(4.5) = 19.993

Equation for linear trend: Tt = 19.993 + 1.774 t

Conclusion: The firm has been realizing an average cost increase of $1.77 per unit per year.
17. a.
29
27

Rating

25
23
21
19
17
15
0

10
Season

The graph shows a linear trend.

b. The following values are needed to compute the slope and intercept:

t = 105

= 1015

tY

= 301

= 2115.8

Computation of slope:
b1 =

tY ( t Y ) / n = 2115.8 (105)(301) /14 = 0.62286

1015 (105) /14
t (t ) / n
t

Computation of intercept:
b0 = Y b1 t = 21.5(-0.62286)(7.5) = 26.1714

Equation for linear trend: Tt = 26.171 - 0.623t

6-9

15

Chapter 6

c. 2001 - 2002: Tt = 26.171 - 0.623(15) = 16.83

18. a.

65

Percent Voting

60
55
50
45
40
0

Year
The graph shows a linear trend.
b. The following values are needed to compute the slope and intercept:

t = 55

= 385

= 542.77

tY

= 2891.1

Computation of slope:
b1 =

tY ( t Y ) / n = 2891.1 (55)(542.77) /10 = 1.141

385 (55) /10
t (t ) / n
t

Computation of intercept:
b0 = Y b1 t = (542.77/10) - (-1.141)(55/10) = 60.553
Equation for linear trend: Tt = 60.553 - 1.141t
The average decrease per presidential election is approximately 1.14%
c. 2004 forecast: T8 = 60.553 - 1.141(11) = 48.0%
19. a.

The following values are needed to compute the slope and intercept:

= 78

= 650

Yt

= 343

t Y t = 2441

Computation of slope:
b1 =

tY d
t Y i / n = 2441 (78)(343) / 12 = 1479
.
650 (78) / 12
/
t
t
n

d
i

t

6 - 10

10

12

Forecasting

Computation of intercept:
b0 = Y - b1 t = (343/12) - 1.479(78/12) = 18.97

Equation for linear trend: Tt = 18.97 + 1.479 t

b.
45

Expenditures

40
35
30
25
20
15
10
0

10

12

14

Time

c.

20. a.
b.

Capital expenditures are increasing by 1.479 billions of dollars per quarter.

T16 = 18.97 + 1.479(16) = 42.6340
A graph of these data shows a linear trend.
The following values are needed to compute the slope and intercept:

= 15

= 55

Yt

= 200

t Y t = 750

Computation of slope:
b1 =

tY d
t Y i / n = 750 (15)(200) / 5 = 15
55 (15) / 5
t d
ti / n
t

Computation of intercept:
b0 = Y - b1 t = 40 - 15(3) = -5

Equation for linear trend: Tt = -5 + 15t

Conclusion: average increase in sales is 15 units per year

6 - 11

Chapter 6

21. a.
b.

Yes, a linear trend appears to exist.

The following values are needed to compute the slope and intercept:

= 28

= 140

Yt

= 595

t Y t = 2815

Computation of slope:
b1 =

tY d
t Y i / n = 2815 (28)(595) / 7 = 155357
.
140 (28) / 7
t d
ti / n
t

Computation of intercept:
b0 = Y - b1 t = 85 - 15.5357(4) = 22.857

Equation for linear trend: Tt = 22.857 + 15.536t

c.
22. a.

Forecast: T8 = 22.857 + 15.536(8) = 147.15

A linear trend appears to be appropriate.

b.

T2 = 6.4564 + 0.5345t

c.

5.345 million

d.

2001 - 2002 season: T13 = 6.4564 + 0.5345(12) = 12.87 million

23.

Note: Results were obtained using the Forecasting module of The Management Scientist.
a.
Smoothing Constant
= .3
= .4
= .5

MSE
4,492.37
2,964.67
2,160.31

The = .5 smoothing constant is better because it has the smallest MSE.

b.

Tt = 244.778 + 22.088t
MSE = 357.81

c.

Trend projection provides much better forecasts because it has the smallest MSE. The reason MSE
is smaller for trend projection is that sales are increasing over time; as a result, exponential
smoothing continuously underestimates the value of sales. If you look at the forecast errors for
exponential smoothing you will see that the forecast errors are positive for periods 2 through 18.

6 - 12

Forecasting

24.

Note: Results were obtained using the forecasting module of The Management Scientist.
a.

Forecast for July is 236.97

Forecast for August, using forecast for July as the actual sales in July, is 236.97.
Exponential smoothing provides the same forecast for every period in the future. This is why it is
not usually recommended for long-term forecasting.

b.

Tt = 149.719 + 18.451t
Forecast for July is 278.88
Forecast for August is 297.33

c.

25. a.

The proposed settlement is not fair since it does not account for the upward trend in sales. Based
upon trend projection, the settlement should be based on forecasted lost sales of $278,880 in July
and $297,330 in August.
Four quarter moving averages beginning with
(1690 + 940 + 2625 + 2500) / 4 = 1938.75
Other moving averages are
1966.25
1956.25
2025.00
1990.00

2002.50
2052.50
2060.00
2123.75

b.
Quarter
1
2
3
4

Seasonal-Irregular
Component Values
0.904
0.900
0.448
0.526
1.344
1.453
1.275
1.164

Seasonal Index
0.9020
0.4970
1.3985
1.2195
4.0070

Adjusted Seasonal
Index
0.900
0.486
1.396
1.217

Note: Adjustment for seasonal index = 4.000 / 4.007 = 0.9983

c.

The largest seasonal effect is in the third quarter which corresponds to the back-to-school
demand during July, August, and September of each year.

6 - 13

Chapter 6

26.
Seasonal-Irregular
Component Values
0.72
0.70
0.80
0.75
0.83
0.82
0.94
0.99
1.01
1.02
1.25
1.36
1.49
1.51
1.19
1.26
0.98
0.97
0.98
1.00
0.93
0.94
0.78
0.80

Month
1
2
3
4
5
6
7
8
9
10
11
12

Seasonal Index
0.71
0.78
0.83
0.97
1.02
1.31
1.50
1.23
0.98
0.99
0.94
0.79
12.05

Adjusted Seasonal Index

0.707
0.777
0.827
0.966
1.016
1.305
1.494
1.225
0.976
0.986
0.936
0.787

Notes: 1. Adjustment for seasonal index = 12 / 12.05 = 0.996

2. The adjustment is really not necessary in this problem since it implies more accuracy
than is warranted. That is, the seasonal component values and the seasonal index were
rounded to two decimal places.
27. a.

Use a twelve period moving averages. After centering the moving averages, you should obtain the
following seasonal indexes:
Hour
1
2
3
4
5
6

b.

Seasonal Index
0.771
0.864
0.954
1.392
1.571
1.667

Hour
7
8
9
10
11
12

Seasonal Index
1.207
0.994
0.850
0.647
0.579
0.504

The hours of July 18 are number 37 to 48 in the time series. Thus the trend component for 7:00 a.m.
on July 18 (period 37) would be
T37 = 32.983 + .3922(37) = 47.49
A summary of the trend components for the twelve hours on July 18 is as follows:
Hour
1
2
3
4
5
6

c.

Trend Component
47.49
47.89
48.28
48.67
49.06
49.46

Hour
7
8
9
10
11
12

Trend Component
49.85
50.24
50.63
51.02
51.42
51.81

Multiply the trend component in part b by the seasonal indexes in part a to obtain the twelve hourly
forecasts for July 18. For example, 47.49 x (.771) = 36.6 or rounded to 37, would be the forecast for
7:00 a.m. on July 18th.

6 - 14

Forecasting

The seasonally adjusted hourly forecasts for July 18 are as follows:

Hour
1
2
3
4
5
6

Forecast
37
41
46
68
77
82

t
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Sales
6
15
10
4
10
18
15
7
14
26
23
12
19
28
25
18
22
34
28
21
24
36
30
20
28
40
35
27

Hour
7
8
9
10
11
12

Forecast
60
50
43
33
30
26

Centered
Moving Average

Seasonal-Irregular
Component

9.250
10.125
11.125
12.125
13.000
14.500
16.500
18.125
19.375
20.250
20.750
21.750
22.875
24.000
25.125
25.875
26.500
27.000
27.500
27.625
28.000
29.000
30.125
31.625

1.081
0.395
0.899
1.485
1.154
0.483
0.848
1.434
1.187
0.593
0.916
1.287
1.093
0.750
0.876
1.314
1.057
0.778
0.873
1.303
1.071
0.690
0.929
1.265

28. a.

b.
Quarter
1
2
3
4

Seasonal-Irregular
Component Values
0.899, 0.848, 0.916, 0.876, 0.873, 0.929
1.485, 1.434, 1.287, 1.314, 1.303, 1.265
1.081, 1.154, 1.187, 1.093, 1.057, 1.071
0.395, 0.483, 0.593, 0.750, 0.778, 0.690
Total

6 - 15

Seasonal Index
0.890
1.348
1.107
0.615
3.960

Chapter 6

Quarter
1
2
3
4

Adjusted Seasonal Index

0.899
1.362
1.118
0.621

Note: Adjustment for seasonal index = 4.00 / 3.96 = 1.0101

c.

Hudson Marine experiences the largest seasonal increase in quarter 2. Since this quarter occurs
prior to the peak summer boating season, this result seems reasonable.

29. a.

t
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Sales
4
2
1
5
6
4
4
14
10
3
5
16
12
9
7
22
18
10
13
35

Quarter

Centered
Moving Average

Seasonal-Irregular
Component

3.250
3.750
4.375
5.875
7.500
7.875
7.875
8.250
8.750
9.750
10.750
11.750
13.250
14.125
15.000
17.375

0.308
1.333
1.371
0.681
0.533
1.778
1.270
0.364
0.571
1.641
1.116
0.766
0.528
1.558
1.200
0.576

Seasonal-Irregular
Component Values

Seasonal
Index

1
2
3
4

1.371, 1.270, 1.116, 1.200

0.681, 0.364, 0.776, 0.576
0.308, 0.533, 0.571, 0.528
1.333, 1.778, 1.641, 1.558
Total

Quarter
1
2
3
4

Adjusted
Seasonal Index
1.271
0.613
0.498
1.619

6 - 16

1.239
0.597
0.485
1.578
3.899

Forecasting

Note: Adjustment for seasonal index = 4 / 3.899 = 1.026

The largest effect is in quarter 4; this seems reasonable since retail sales are generally higher during
October, November, and December.

b.

30. a.

Note: To simplify the calculations the seasonal indexes calculated in problem 28 have been rounded
to two decimal places.

Year

Quarter

Sales Yt

1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4

6
15
10
4
10
18
15
7
14
26
23
12
19
28
25
18
22
34
28
21
24
36
30
20
28
40
35
27

Seasonal Factor
St
0.90
1.36
1.12
0.62
0.90
1.36
1.12
0.62
0.90
1.36
1.12
0.62
0.90
1.36
1.12
0.62
0.90
1.36
1.12
0.62
0.90
1.36
1.12
0.62
0.90
1.36
1.12
0.62

6 - 17

Deseasonalized Sales
Yt / St = TtIt
6.67
11.03
8.93
6.45
11.11
13.24
13.39
11.29
15.56
19.12
20.54
19.35
21.11
20.59
22.32
29.03
24.44
25.00
25.00
33.87
26.67
26.47
26.79
32.26
31.11
29.41
31.25
43.55

Chapter 6

t
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
406
t = 14.5

Yt
(deseasonalized)
6.67
11.03
8.93
6.45
11.11
13.24
13.39
11.29
15.56
19.12
20.54
19.35
21.11
20.59
22.32
29.03
24.44
25.00
25.00
33.87
26.67
26.47
26.79
32.26
31.11
29.41
31.25
43.55
605.55
Y = 21.627

b1 = 1.055

tYt

t2
1
4
9
16
25
36
49
64
81
100
121
144
169
196
225
256
289
324
361
400
441
484
529
576
625
676
729
784
7,714

6.67
22.06
26.79
25.80
55.55
79.44
93.73
90.32
140.04
191.20
225.94
232.20
274.43
288.26
334.80
464.48
415.48
450.00
475.00
677.40
560.07
582.34
616.17
774.24
777.75
764.66
843.75
1,219.40
10,707.34
b0 = 6.329

T t = 6.329 + 1.055t

b.
t
29
30
31
32

Trend Forecast
36.92
37.98
39.03
40.09

c.
Year
8

Quarter
1
2
3
4

Trend Forecast
36.92
37.98
29.03
40.09

6 - 18

Seasonal Index
0.90
1.36
1.12
0.62

Quarterly Forecast
33.23
51.65
43.71
24.86

Forecasting

31. a.

Note: To simplify the calculations the seasonal indexes in problem 29 have been round to two
decimal places.

Year

Quarter

Sales Yt

1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4

4
2
1
5
6
4
4
14
10
3
5
16
12
9
7
22
18
10
13
35

t
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
210

Seasonal Factor
St
1.27
0.61
0.50
1.62
1.27
0.61
0.50
1.62
1.27
0.61
0.50
1.62
1.27
0.61
0.50
1.62
1.27
0.61
0.50
1.62

Yt
(deseasonalized)
3.15
3.28
2.00
3.09
4.72
6.56
8.00
8.64
7.87
4.92
10.00
9.88
9.45
14.75
14.00
13.58
14.17
16.39
26.00
21.60
202.05

6 - 19

tYt
3.15
6.56
6.00
12.36
23.60
39.36
56.00
69.12
70.83
49.20
110.00
118.56
122.85
206.50
210.00
217.28
240.89
295.02
494.00
432.00
2783.28

Deseasonalized Sales
Yt / St = TtIt
3.15
3.28
2.00
3.09
4.72
6.56
8.00
8.64
7.87
4.92
10.00
9.88
9.45
14.75
14.00
13.58
14.17
16.39
26.00
21.60

t2
1
4
9
16
25
36
49
64
81
100
121
144
169
196
225
256
289
324
361
400
2870

Chapter 6

t = 10.5

Y = 10.1025

b1 = .995

b0 = - .345

T t = - .345 + .995 t

b.
y
21
22
23
24

Trend Forecast
20.55
21.55
22.54
23.54

c.
Year
6

32.

Trend
Forecast
20.55
21.55
22.54
23.54

Quarter
1
2
3
4

Seasonal
Index
1.27
0.61
0.50
1.62

Quarterly
Forecast
26.10
13.15
11.27
38.13

Note: Results were obtained using the Forecasting module of The Management Scientist.
a.

Yes, there is a seasonal effect over the 24 hour period.

Time Period
12 - 4 a.m.
4 - 8 a.m.
8 - 12
12 - 4 p.m.
4 - 8 p.m.
8 - 12

Seasonal Index
1.696
1.458
0.711
0.326
0.448
1.362

Time Period
12 - 4 p.m.
4 - 8 p.m.

Forecast
166,761.13
146,052.99

b.

33.

x=7

b.

Restaurant
(i)

xi

yi

xi yi

xi2

1
2
3
4
5
Totals

1
4
6
10
14
35

19
44
40
52
53
208

19
176
240
520
742
1,697

1
16
36
100
196
349

y = 41.6

b1 = 2.317

b0 = 25.381

y = 25.381 + 2.317(8) = 43.917 or $43,917

6 - 20

y = 25.381 + 2.317 x

Forecasting

34.

Note: To simplify the calculations let y = sales ($100s)

x=3

b.

xi

yi

xiyi

1
1
2
3
3
4
5
5
24

36
33
31
29
27
25
23
20
224

36
33
62
87
81
100
115
100
614

y = 28

b1 = 3.222

b0 = 37.666

xi2
1
1
4
9
9
16
25
25
90
y = 37.666 3.222 x

y = 37.666 - 3.222 (1) = 34.44 or $3444

35.

x = 35

b.

xi

yi

xiyi

20
20
40
30
60
40
210

21
19
15
16
14
17
102

420
380
600
480
840
680
3400

y = 17

b1 = 0.1478

b0 = 22.713

xi2
400
400
1600
900
3600
1600
8500
y = 22.713 0.1478 x

y = 22.173 - 0.1478(50) = 14.783 or approximately 15 defective parts

6 - 21