Baby Its You, a maker of baby foods, has found a high correlation between the aggregate company
Question:
Baby It’s You, a maker of baby foods, has found a high correlation between the aggregate company sales (in $100,000) and the number of births nationally the preceding year. Suppose that the sales and the birth figures during the past eight years are
Year | ||||||||
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | |
| Sales (in $100,000) | 6.1 | 6.4 | 8.3 | 8.8 | 5.1 | 9.2 | 7.3 | 12.5 |
| U.S. births (in millions) | 2.9 | 3.4 | 3.5 | 3.1 | 3.8 | 2.8 | 4.2 | 3.7 |
a. Assuming that U.S. births represent the independent variable and sales the dependent variable, determine a regression equation for predicting sales based on births. Use years 2 through 8 as your baseline. (Hint: You will require the general regression formulas appearing in Appendix 2-B to solve this problem.)
b. Suppose that births are forecasted to be 3.3 million in year 9. What forecast for sales revenue in year 10 do you obtain using the results of part (a)?
c. Suppose that simple exponential smoothing with α = .15 is used to predict the number of births. Use the average of years 1 to 4 as your initial forecast for period 5, and determine an exponentially smoothed forecast for U.S. births in year 9.
d. Combine the results in parts (a), (b), and (c) to obtain a forecast for the sum of total aggregate sales in years 9 and 10.
Expert Answer:
aUse year 2 through 8 as baselineRegression equation Year Sale Y Births X XY X 2 Y 2 2 64 34 2176 11... View the full answer
