AmeriPlas, Inc., produces 20-ounce plastic drinking cups that are embossed with the names of prominent beers and soft drinks.

a. Prepare a time-series plot of the sales data. Does there appear to be a regular pattern of movement in the data that may be seasonal? Ronnie Newton, the product manager for this product line, believes that her brief review of sales data for the four-year period indicates that sales are slower in the colder months of November through February than in other months. Do you agree?

b. Since production is closely related to orders for current shipment, Ronnie would like to have a monthly sales forecast that incorporates monthly fluctuations. She has asked you to develop a trend model that includes dummy variables, with January as the base period (i.e., 11 dummy variables for February through December). Use M2 for the February dummy variable, which will equal 1 for each February and zero otherwise: M3 for the March dummy variable, which will equal 1 for each March and zero otherwise; and so forth to M12 for the December dummy variable, which will equal 1 for each December and zero otherwise. Summarize your results:

Do these results support Ronnie Newton's observations? Explain.

c. While sales of this new product have experienced considerable growth in the first four years, Ronnie believes that there has been some decrease in the rate of growth. To test this and to include such a possibility in the forecasting effort, she has asked that you add the square of the time index (T) to your model (call this new term 72). Summarize the new results:

Is there any evidence of a slowing of sales growth? Compare the results of this model with those found in part (b).

d. Use the model in part (c) to forecast sales for 2008 and calculate the RMSE for the forecast period. Actual sales are as follows:

Transcribed Image Text:

Period Sales Time МЗ M5 M6 M7 м8 M9 M10 M11 M12 M2 M4 Jan-04 857 1 Feb-04 921 Mar-04 1,071 1. Apr-04 May-04 1,133 1,209 1,234 1,262 Jun-04 Jul-04 Aug-04 Sep-04 1,258 1,175 10 Oct-04 1,174 Nov-04 1,123 1,159 1,250 11 Dec-04 12 Jan-05 13 Feb-05 1,289 14 Mar-05 1,448 1,497 1,560 1,586 1,597 15 Apr-05 May-05 Jun-05 16 17 18 1 Jul-05 19