Narsee Monjee Institute of Management Studies

MBA Core: Trimester III 2017-18

Title: Forecasting-II

Problems:

1) The accompanying table shows Sales for the past 10 years.

--------------------------------------------------------------------------------------------------------
Year 1 2 3 4 5 6 7 8 9 10
Sales 21.6 22.9 25.5 21.9 23.9 27.5 31.5 29.7 28.6 31.4
--------------------------------------------------------------------------------------------------------
Using Regression Analysis, identify a linear trend. Obtain a forecast for the next period.

2) A store in Mumbai has used weekend television commercials, on ten occasions during the past three
months, to promote sales at its stores. The manager wants to investigate whether a relationship can be
demonstrated, between the number of commercials shown and the sales at the store during the following
week. Sample data for the 10 weeks with sales are shown below:
--------------------------------------------------------------------------------------------------------
Week 1 2 3 4 5 6 7 8 9 10
No. of Com. 2 5 1 3 4 1 5 3 4 2
Sales 50 57 41 54 54 38 63 48 59 46
--------------------------------------------------------------------------------------------------------
If a relationship exists, estimate the sales corresponding to four commercials planned for the next week.
Also calculate the coefficient of determination.

3) Sales of Cool Air Conditioners have grown steadily during the past five years

Time Period X Sales Y

1 450
2 495
3 518
4 563
5 584
6 ?

Using Regression Method, develop a forecasting model for the sales of Cool air conditioners.

4) Table shows the average rainfall in Mumbai (in cm per day) and the corresponding sale of umbrellas (in
thousands of rupees per day) at the biggest umbrella selling shop. Using trend analysis, determine the trend
forecast for the sale of umbrellas corresponding to the average rainfall in Mumbai at 40 cm, 45cm and 50 cm.

Average 5 10 15 20 25 30 35
Rainfall
Sale of 0.6 0.9 2.7 2.5 2.8 4.2 4.4
Umbrellas

1
5)A cost accountant derived the following data on the weekly output (‘000s) of standard size boxes and
Total cost (Rs. ‘000s) from a factory.

Week 1 2 3 4 5 6 7 8 9 10

Output 20 2 4 23 18 14 10 8 13 8

Total 60 25 26 66 49 48 35 18 40 33
Cost
i) Plot a scatter diagram of the data
ii) Which weekly outputs, if any, appear to be different from the rest of the data
iii) Find regression of Total cost on Output
iv) If in a given week, it is planned to produce 25,000 standard size boxes, use your regression
equation to estimate the total cost of producing this quantity.

6)A large consumer products company wants to measure the effectiveness of different types of
advertising media in the promotion of its products. Specifically, two types of advertising media are to
be considered: radio advertising and newspaper advertising (including the cost of discount coupons). A
sample of 22 cities with approximately equal populations is selected for study during a test period of one
month. Each city is allocated a specific expenditure level both for radio advertising and for newspaper
advertising. The sales of the product (in thousands of dollars) and also the levels of media expenditure
during the test month are recorded, with the following results. (Advertise)

a. State the multiple regression equation.

b. Interpret the meaning of the slopes b1 and b2 in this problem
c. Interpret the meaning of the regression coefficient b0.

Predict the average sales for a city in which radio advertising is $20,000 and newspaper advertising
is $ 20,000. Set up a 95% confidence interval estimate for the average sales for cities in which radio
advertising is $20,000 and newspaper advertising is $20,000.

Model R R Adjusted Std. Change Statistics

Square R Error of Sig. F R F df1 df2
Square the Change Square Change
Estimate Change
1 .899(a) .809 .789 158.904 .809 40.158 2 19 .000
a Predictors : (Constant), Newspaper, radio
b Dependent Variable : Sales

ANOVA
Model Sum of df Mean Square F Sig
Squares
1 Regression 2028032.690 2 1014016.345 40.158 .000(a)

Residual 479759.901 19 25250.521

2
 Total 2507792.591 21
a Predictors : (Constant), Newspaper, radio
b Dependent Variable : sales

Coefficients
Model Unstandardized Stand t Sig 95% Confidnece Collinearity
Coefficients ardize Interval for B Statistics
d
Coeffi
cients
B Std. Beta Lower Upper Tole VIF
Error Bound Bound ranc
e
1 (Constan 156.430 126.758 1.234 .232 -108.877 421.738
t)

Radio 13.081 1.759 .749 7.435 .000 9.398 16.763 .992 1.009

Newspaper 16.795 2.963 .571 5.668 .000 10.593 22.998 .992 1.009

a Dependent Variable : sales

7)Fit an appropriate (3 Variable) regression model to the following data {Y Agricultural Production; X2
Expenditure on Fertilizer; X3 Expenditure on Irrigation Projects}
----------------------------------------------------------------------------
Y 6 10 11 19 20 25 30
----------------------------------------------------------------------------
X2 1 2 3 7 10 11 13
----------------------------------------------------------------------------
X3 20 40 40 51 52 60 60
----------------------------------------------------------------------------

The following Summary Output is available (from Standard Software)

ˆ  1.34  1.39X  0.14X

i 2i 3i

p value (t test) 0.015 0.295

R = 0.986

R2 = 0.974

β̂ 2 95% C
L
 0.43 to 2.37

3
(F test – Anova) p value = 0.0007

Interpret the output & provide the necessary observations?

Suggested Interpretations / Observations

We define the following 3 Variable Regression Model

ˆ  β̂  β̂ X  β̂ X
i 1 2 2i 3 3i

Y - Agriculture Production, X2 - Expense on Fertilizer, X3 - Expenses on Irrigation Project

1. Interpretation of Partial Regression Coefficients

2. Interpretation of R
3. Interpretation of R2
4. Interpretation of 95% confidence level for β̂ 2
5. Interpretation of p value (t test)
6. Interpretation of p value (F test)

8)The data shown in table is known about the employees in an organization.

Performance 28 33 21 40 38 46
Evaluation(Y)
Aptitude test 74 87 69 69 81 97
score(X1)
Prior 5 11 4 9 7 10
experience(X2)
(a) Develop an estimating equation best describing this data.
(b) If an employee scored 83 on the aptitude test and had a prior experience of 7, what is the expected
performance evaluation?