Question

FC.71 Five-star sells school related products. Their top seller, the five subject spiral notebook, has done very well. The notebook's sales during the back-to-school season (July through October) over the last three years are shown below:

Month	2017	2018	2019
July	135,000	144,000	111,000
August	146,000	154,000	160,000
September	60,000	62,000	67,000
October	65,000	66,000	59,000

For the five-subject notebook, Five-star's projected sales for the 2020 back-to-school season of are 375,000. Based on the past sales and this year's projected sales, answer the following questions.

Given the above information and using the most appropriate forecasting method, what should be the forecast for July 2020 sales? (Display your answer to the nearest whole number.)

   

What is the forecast for August 2020 sales? (Display your answer to the nearest whole number.)

   

What is the forecast for September 2020 sales? (Display your answer to the nearest whole number.)

   

What is the forecast for October 2020 sales? (Display your answer to the nearest whole number.)

   

Answer 1

Answer:

Data given in the question is as under:

Month	2017	2018	2019
July	135000	144000	111000
August	146000	154000	160000
September	60000	62000	67000
October	65000	66000	59000

The most appropriate forecasting method for this situation is Multiplicative Seasonal Forecast

First calculate the total of all 4 Months of each year and then its average.

Total of Demand for 2017 = (135000+146000+60000+65000) = 406000

Average of demand for 2017 = 406000/4 = 101500

Total of Demand for 2018 = 144000+154000+62000+66000 = 426000

Average of demand for 2018 = 426000/4 = 106500

Total of Demand for 2019 = 111000+160000+67000+59000= 397000

Average of demand for 2019 = 397000/4 = 99250

Calculate the Seasonal Factor for each month of each year

Seasonal factor = Demand for particular month of same year / Average of Particular year’s months demand

Seasonal Factor for July of 2017 = Demand for July of 2017 / Average of 2017 months demand = 135000/101500= 1.33

Seasonal Factor for August of 2017 = Demand for August of 2017 / Average of 2017 months demand = 146000/101500 = 1.44

Seasonal Factor for September of 2017 = Demand for September of 2017 / Average of 2017 months demand = 60000/101500 = 0.59

Seasonal Factor for October of 2017 = Demand for October of 2017 / Average of 2017 months demand = 65000/101500 = 0.64

Similarly the factors of months for 2018 and 2019 is calculated as under:

	2017		2018		2019
Month	Demand	Factor 2017	Demand	Factor 2018	Demand	Factor 2019
July	135000	1.33	144000	1.35	111000	1.12
August	146000	1.44	154000	1.45	160000	1.61
September	60000	0.59	62000	0.58	67000	0.68
October	65000	0.64	66000	0.62	59000	0.59
Total	406000		426000		397000
Average	101500		106500		99250

Calculate the Average Seasonal Factor Index of each quarter.

Average Seasonal Factor Index for July= [July Factor 2017 + July Factor 2018 + July Factor 2019]/3 = (1.33+1.35+1.12)/3 = 1.27

Average Seasonal Factor Index for August= [August Factor 2017 + August Factor 2018 + August Factor 2019]/3 = (1.44+1.45+1.61)/3 = 1.50

Average Seasonal Factor Index for September= [September Factor 2017 + September Factor 2018 + September Factor 2019]/3 = (0.59+0.58+0.68)/3 =0.62

Average Seasonal Factor Index for October= [October Factor 2017 + October Factor 2018 + October Factor 2019]/3 = (0.64+0.62+0.59)/3 = 0.62

Month	Average Seasonal Factor Index
July	1.27
August	1.50
September	0.62
October	0.62

Annual Demand for 2020 = 375000

Therefore, Average monthly demand for 2020= 375000/4 = 93750

a) July Demand for 2020 = Average Seasonal Factor index for July * Average monthly demand for 2020= 1.27*93750 = 118767

b) August Demand for 2020 = Average Seasonal Factor index for August* Average monthly demand for 2020= 1.50*93750 = 140516

c) September Demand for 2020 = Average Seasonal Factor index for September* Average monthly demand for 2020= 0.62*93750 = 57761

d) October Demand for 2020 = Average Seasonal Factor index for October * Average quarterly demand for 2020 = 0.62*93750 = 57955

	2020
Month	Demand
July	118767
August	140516
September	57761
October	57955
Total	375000
Average	93750

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