1. PROBLEM Facts Known: The quarterly sales data (number of copies sold) for a college textbook over the past three years are as follows:
Quarter Year 1 Year 2 Year 3
1 1690 1800 1850
2 940 900 1100
3 2625 2900 2930
4 2500 2360 2615
b.) Use a regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if Quarter 1, 0 otherwise; Qtr2 = 1 if Quarter 2, 0 otherwise; Qtr3 = 1 if Quarter 3, 0 otherwise.
c.) Compute the quarterly forecasts for next year.
d.) Let t = 1 to refer to the observation in quarter 1 of year 1; t = 2 to refer to the observation in quarter 2 of year 1, … ; and t = 12 to refer to the observation in quarter 4 of year 3. Using dummy variables defined in part (b) and also using t, develop an equation to account for seasonal effects ad any linear trend in the time series. Based upon the seasonal effects in the data and linear trend, compute the quarterly forecasts for next year.