Chemical Company Sales
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The equation describing the sales trend of the Chemical Company is St=21.3+1.3t, where St is the sales (in millions of dollars per month) of the firm and t is time measured in months from January 1995. The firm's seasonal index of sales is:
Jan 103 May 101 Sept 121
Feb 80 June 104 Oct 101
Mar 75 July 120 Nov 75
April 103 August 139 Dec 78
A. Construct a monthly sales forecast for the firm for 2001.
B. Why would the managers of the Chemical Company want monthly sales forecasts of this kind?
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Solution Summary
This solution constructs a monthly sales forecast based on a sales trend and seasonal index of sales.
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Part A:
For this problem Jan 1995 is month 0 (t = 0)
Jan 2001 is month t = 72: (2001 - 1995) * 12 = 72 and Dec 2001 is month t = 72 + 11 = 83
The monthly sales forecast (in millions of dollars) for 2001 is as follows:
Jan 2001 (t = 72): (21.3 + 1.3 * 72) * 1.03 = 118.3
Feb ...
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