Instruction 14-5
a Local Store Developed a Multiplicative Time-Series Model $\hat { Y }$

question 4

Multiple Choice

Instruction 14-5
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 2005 to 2009.The following is the resulting regression equation:
log 10 $\hat { Y }$ = 6.102 + 0.012 X - 0.129 Q₁ - 0.054 Q₂ + 0.098 Q₃
Where
$\hat { Y }$ is the estimated number of contracts in a quarter
X is the coded quarterly value with X = 0 in the first quarter of 2005.
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 Instruction 14-5,the best interpretation of the coefficient of Q₂ (-0.054) in the regression equation is

• A)the revenues in the second quarter of a year is approximately 11.69% lower than the average over all 4 quarters.
• B)the revenues in the second quarter of a year is approximately 11.69% lower than it would be during the fourth quarter.
• C)the revenues in the second quarter of a year is approximately 5.4% lower than it would be during the fourth quarter.
• D)the revenues in the second quarter of a year is approximately 5.4% lower than the average over all 4 quarters.

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Definitions:

Control Over Inventory

The processes and systems put in place by a business to ensure that its inventory is managed effectively and efficiently, preventing overstock and shortages.

Safeguarding Inventory

Strategies and practices aimed at protecting inventory from loss, theft, or damage.

Financial Statements

Reports that summarize the financial performance and position of a company, including the balance sheet, income statement, and statement of cash flows.

Physical Count

A manual counting process of inventory items in a business, used to verify the quantities of goods on hand and ensure the accuracy of accounting records.