Sales Forecast Modeling
Toys Unlimited, Ltd., must forecast sales for a popular adult com- puter game to avoid stockouts or excessive inventory charges during the upcoming Christmas season. In percentage terms, the company estimates that game sales fall at double the rate of price increases and that they grow at triple the rate of customer traffic increases. Furthermore, these effects seem to be independent.
A. Write an equation for estimating the Christmas season sales, using the variables S = sales, P = price, T = traffic, and t = time.
B. Forecast this season's sales if Toys Unlimited sold 10,000 games last season at $15 each, this season's price is anticipated to be $16.50, and customer traffic is expected to rise by 15% over previous levels.