A Time Series Regression Equation Measuring the Number of Surfboards

question 40

Multiple Choice

A time series regression equation measuring the number of surfboards sold by a surfboard manufacturing company in Australia is given below:
Y = 35 + 4Q₁ + 0.5Q₃ + 8Q₄ + 3t
With t in quarters and the origin is December 2010 and Q₁ is the indicator variable for March, Q₃ is the indicator variable for September and Q₄ is the indicator variable for December.
Which of the following statements is correct regarding the trend component?

• A) There were 43 surfboards sold in December 2010, and this increases by 3 surfboards per quarter, irrespective of the season of the year.
• B) There were 35 surfboard sold in December 2010, and this increases by 15.5 surfboards per quarter, irrespective of the season of the year.
• C) There were 35 surfboard sold in December 2010, and this increases by 3 surfboards per quarter, irrespective of the season of the year.
• D) None of these choices are correct.

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Definitions:

Sales Account

An account in a company's financial records that tracks the revenue generated from goods and services sold.

Sales Discount

A reduction in the price of goods or services offered to customers, usually to encourage prompt payment.

Perpetual Inventory System

This technique documents transactions of inventory sales or purchases in real-time, utilizing computer-based point-of-sale systems and software designed for managing company assets.

Physical Inventory

The process of counting the actual items of inventory in stock to verify records and accounts.