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The Costello Music Company has been in business for five years. During that time, sales of pianos increased from 12 units in the first year to 76 units in the most recent year. Fred Costello, the firm's owner, wants to develop a forecast of piano sales for the coming year. The historical data follow. Year 1 2 3 4 5 Sales 12 28 34 50 76 a. Construct a time series plot. What type of pattern exists in the data? b. Develop the linear trend equation for the time series. What is the average increase in sales that the firm has been realizing per year? c. Forecast sales for years 6 and 7.
STATISTICS F/BUSINESS+ECONOMICS-TE...
STATISTICS F/BUSINESS+ECONOMICS-TE...
The Costello Music Company has been in business for five years. During that time, sales of pianos increased from 12 units in the first year to 76 units in the most recent year. Fred Costello, the firm's owner, wants to develop a forecast of piano sales for the coming year. The historical data follow.
| Year | 1 | 2 | 3 | 4 | 5 |
| Sales | 12 | 28 | 34 | 50 | 76 |
- a. Construct a time series plot. What type of pattern exists in the data?
- b. Develop the linear trend equation for the time series. What is the average increase in sales that the firm has been realizing per year?
- c. Forecast sales for years 6 and 7.
a.
Construct the time series plot.
Explain the type of pattern.
Explanation of Solution
Calculation:
It is given that Costello Music Company is in business for five years. In that period, the sales of the piano increased from 12 units in the first year to 76 units in the latest year.
Software procedure:
Step-by-step procedure to draw the time series plot using the MINITAB software:
- Choose Graph > Time Series Plot...
b.
Calculate the linear trend equation for data.
Find the average increase in sales per year.
c.
Calculate the forecast sales of years 6 and 7.
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