TABLE 16-13 A Local Store Developed a Multiplicative Time-Series Model to Forecast

question 22

Short Answer

TABLE 16-13
A local store developed a multiplicative time-series model to forecast its revenues in future quarters, using quarterly data on its revenues during the 4-year period from 1998 to 2002. The following is the resulting regression equation:
log₁₀Y^{^} = 6.102 + 0.012 X - 0.129 Q₁ - 0.054 Q₂ + 0.098 Q₃
where
Y^{^} is the estimated number of contracts in a quarter
X is the coded quarterly value with X = 0 in the first quarter of 1998.
Q₁ is a dummy variable equal to 1 in the first quarter of a year and 0 otherwise.
Q₂ is a dummy variable equal to 1 in the second quarter of a year and 0 otherwise.
Q₃ is a dummy variable equal to 1 in the third quarter of a year and 0 otherwise.
-Referring to Table 16-13, using the regression equation, what is the forecast for the revenues in the fourth quarter of 2004?

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Definitions:

By-Product

A secondary product derived from the manufacturing process or chemical reaction that is incidental to the main product.

Joint Products

Products that are produced together from the same process or raw materials but are sold as separate items.

Joint Cost Allocation

The process of assigning the costs of a production process that yields multiple products to those products in a rational and consistent manner.

Split-Off

A point in the manufacturing process where multiple products are generated from a single process or input.