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

I need to find Y Jan Next Year, Y Feb Next Year, and Y March Next Year, which are just 19, 20, and 21. Simple continuous count to January = 1 1/2 years or 19 months

The formula for the trend is already given as 60 + 4t

The value of t for the 3 months is found by simply adding as follows:

Ft = 60 + 4 * t

Ft for Jan = Y Jan Next Year = 60 + 4 * 19 = 136

Ft for Feb = Y Feb Next Year = 60 + 4 * 20 = 140

Ft for Mar = Y Mar Next Year = 60 + 4 * 21 = 144

Compute the forecast = trend * seasonal relative

The seasonal relative for each month is already given in the question as 0.89, 0.95, and 1.11 for the 3 months respectively.

We found the 3 trends above as 136, 140, and 144 for the 3 months respectively.

Hence January fore cast = 0.89 * 136 = 121.04

February fore cast = 0.95 * 140 = 133

March fore cast = 1.11 * 144 = 159.79994

Forecasting is the process of making predictions based on past and current data. Later you can compare these to what is actually happening. For example, a company may estimate revenue for the next year and compare it to actual results. Forecasting is a similar but more general term.

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