A manager of a store that sells and installs spas wants to prepare a forecast for January, February, and March of next year. Her forecasts are a combination of trend and seasonality. She uses the following equation to estimate the trend component of monthly demand: Ft 70 5 t, where t 0 in June of last year. Seasonal relatives are 1.10 for January, 1.02 for February, and .95 for March. What demands should she predict

January = 182 units

February = 173 units

March = 166 units

Explanation:

I suppose that the demand equation is F(t) = 70 + 5t

month                             t

June last year  0

July last year          1

August last year  2

September last year      3

October last year  4

November last year5

December last year6

January this year  7

February this year  8

March this year  9

April this year          10

May this year          11

June this year  12

July this year          13

August this year  14

September this year15

October this year  16

November this year17

December this year18

January next year  19

February next year20

March next year  21

tend analysis:

January = 70 + (5 x 19) = 165

February = 70 + (5 x 20) = 170

March = 70 + (5 x 21) = 175

since the seasonal relatives are 1.1, 1.02, and 0.95, the expected demand should be:

January = 165 x 1.1 = 181.5 ≈ 182 units

February = 170 x 1.02 = 173.4 ≈ 173 units

March = 175 x 0.95 = 166.25 ≈ 166 units

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