Question: The Carlson Department Store suffered heavy damage when a hurricane struck on August 31, 2003. The store was closed for four months (Sept - Dec 2003) and Carlson is now involved in a dispute with its insurance company concerning the amount of lost sales during the time the store was closed. Two key issues must be resolved:
The amount of sales Carlson would have made if the hurricane had not struck; and
Whether Carlson is entitled to any compensation for excess sales from increased business activity after the storm
More than $8 billion in federal disaster relief and insurance money came into the county, resulting in increased sales at department stores and numerous other businesses.
The table below shows the sales data for the 48 months preceding the storm. The following table reports total sales for the 48 months preceding the storm for all department stores in the county, as well as the total sales in the county for the four months the Carlson Department Store was closed. Management asks you to analyze this data and develop estimates of the lost sales at the Carlson Department Store for the months of September through December 2003. Management also wants to determine whether a case can be made for excess storm-related sales during the same period. If such a case can be made, Carlson is entitled to compensation for excess sales it would have earned in addition to ordinary sales.
Table 1 - Sales for Carlson Department Store, Sept '99 through Aug '03
|
Month
|
1999
|
2000
|
2001
|
2002
|
2003
|
|
January
|
|
1.45
|
2.31
|
2.31
|
2.56
|
|
February
|
|
1.80
|
1.89
|
1.99
|
2.28
|
|
March
|
|
2.03
|
2.02
|
2.42
|
2.69
|
|
April
|
|
1.99
|
2.23
|
2.45
|
2.48
|
|
May
|
|
2.32
|
2.39
|
2.57
|
2.73
|
|
June
|
|
2.20
|
2.14
|
2.42
|
2.37
|
|
July
|
|
2.13
|
2.27
|
2.40
|
2.31
|
|
August
|
|
2.43
|
2.21
|
2.50
|
2.23
|
|
September
|
1.71
|
1.90
|
1.89
|
2.09
|
|
|
October
|
1.90
|
2.13
|
2.29
|
2.54
|
|
|
November
|
2.74
|
2.56
|
2.83
|
2.97
|
|
|
December
|
4.20
|
4.16
|
4.04
|
4.35
|
|
Table 2 - Department Store Sales for the County, Sept '99 through Dec '03
|
Month
|
1999
|
2000
|
2001
|
2002
|
2003
|
|
January
|
|
46.8
|
46.8
|
43.8
|
48.0
|
|
February
|
|
48.0
|
48.6
|
45.6
|
51.6
|
|
March
|
|
60.0
|
59.4
|
57.6
|
57.6
|
|
April
|
|
57.6
|
58.2
|
53.4
|
58.2
|
|
May
|
|
61.8
|
60.6
|
56.4
|
60.0
|
|
June
|
|
58.2
|
55.2
|
52.8
|
57.0
|
|
July
|
|
56.4
|
51.0
|
54.0
|
57.6
|
|
August
|
|
63.0
|
58.8
|
60.6
|
61.8
|
|
September
|
55.8
|
57.6
|
49.8
|
47.4
|
69.0
|
|
October
|
56.4
|
53.4
|
54.6
|
54.6
|
75.0
|
|
November
|
71.4
|
71.4
|
65.4
|
67.8
|
85.2
|
|
December
|
117.6
|
114.0
|
102.0
|
100.2
|
121.8
|
Prepare a report for the management of the Carlson department store that summarizes your findings, forecasts and recommendations. Include the following:
An estimate of the sales had there been no hurricane.
An estimate of the countywide department store sales had there been no hurricane.
An estimate of lost sales for the Carlson Department store for Sept - Dec 2003.