Question

The Vintage Restaurant, on Captiva Island near Fort Myers, Florida, is owned and operated by Karen Payne. The restaurant just completed its third year of operation. During that time, Karen sought to establish a reputation for the restaurant as a high-quality dining establishment that specializes in fresh seafood. Through the efforts of Karen and her staff, her restaurant has become one of the best and fastest-growing restaurants on the island. To better plan for future growth of the restaurant, Karen needs to develop a system that will enable her to forecast food and beverage sales by month for up to one year in advance. Table below shows the value of food and beverage sales ($1,000s) for the first three years of operation:

	First Year	Second Year	Third Year
Jan	242	263	282
Feb	235	238	255
Mar	232	247	265
Apr	178	193	205
May	184	193	210
Jun	140	149	160
Jul	145	157	166
Aug	152	161	174
Sep	110	122	126
Oct	130	130	148
Nov	152	167	173
Dec	206	230	235

Perform an analysis of the sales data for the Vintage Restaurant. Prepare a report for Karen that summarizes your findings, forecasts, and recommendations. Include the following:

1.A time series plot. Comment on the underlying pattern in the time series.

2.Using the dummy variable approach, forecast sales for January through December of the fourth year.

Assume that January sales for the fourth year turn out to be $295,000. What was your forecast error? If this error is large, Karen may be puzzled about the difference between your forecast and the actual sales value. What can you do to resolve her uncertainty in the forecasting procedure?

Hint: Run the first regression model with only the monthly dummy variables against Sales and the second regression model with Month number and monthly dummy variables against Sales. Compare the two models and select the best model for your forecast.

PLEASE SHOW YOUR CALCULATION AND FORMULAS!!!

Answer 1