The Vintage Restaurant is owned and operated by Kelly. The restaurant just completed its 3rd year of operation. To better plan for the future growth of the restaurant, Kelly needs to develop a system that will enable her to forecast food and beverage sales by month for up to one year in advance. The attached table shows the value of food and beverage sales ($1,000s) for the first three years of operation.
Perform an analysis of the sales data for the Vintage Restaurant. Prepare a report for Kelly that summarizes your findings, forecasts, and recommendations. Include the following:
- A time series plot. Comment on the underlying pattern in the time series.
- Using the dummy variable approach, forecast sales for January through December of the fourth year.
How would you explain this model to Karen? Assume that January sales for the fourth year turn out to be $295,000. What was your forecast error? If this is large, Karen may be puzzled about the difference between your forecast and the actual sales value. What can you do to resolve her uncertainty about the forecasting procedure?