Consider the Following Time Series

question 12

Essay

Consider the following time series:
a. Use a multiple regression model to develop an equation to account for linear trend and seasonal effects in the data. To capture seasonal effects, use the dummy variables Qtr1 = 1 if quarter 1, 0 otherwise; Qtr2 = 1 if quarter 2, 0 otherwise; Qtr3 = 1 if quarter 3, 0 otherwise; and create a variable t such that t = 1 for quarter 1 in year 1, t = 2 for quarter 2 in year 1, … ,t = 12 for quarter 4 in year 3.
b. Compute the quarterly forecasts for next year based on the model developed in part a.

---

Definitions:

Planning Budget

A budget that outlines the expected revenues, expenses, and resources over a specific period, often used as a financial roadmap.

Flexible Budget

A budget that adjusts or flexes for changes in the volume of activity, providing a more useful comparison against actual costs than a static budget.

Actual Activity

The real or factual actions or tasks completed within a period, often measured to assess performance or productivity.

Static Budget

A financial plan that does not change or adjust with variations in business activity levels.