# The Lockit Company manufactures door knobs for residential homes and apartments. Lockit is considering the use of

## Question:

Larry Husky, the controller of Lockit, has considered many possible independent variables and equations to predict sales and has narrowed his choices to four equations. Husky used annual observations from 20 prior years to estimate each of the four equations.

Following are definitions of the variables used in the four equations and a statistical summary of these equations:

St = Forecasted sales in dollars for Lockit in period t

St-1 = Actual sales in dollars for Lockit in period t-1

Gt = Forecasted U.S. gross domestic product in period t

Gt-1 = Actual U.S. gross domestic product in period t-1

Nt-1 = Lockit€™s net income in period t-1

Required:

1. Write Equations 2 and 4 in the form Y = a + bx.

2. If actual sales are $1,500,000 in 2013, what would be the forecasted sales for Lockit in 2014?

3. Explain why Larry Husky might prefer Equation 3 to Equation 2.

4. Explain the advantages and disadvantages of using Equation 4 to forecast sales.

Fantastic news! We've Found the answer you've been seeking!

## Step by Step Answer:

**Related Book For**

## Cornerstones of Cost Management

**ISBN:** 978-1285751788

3rd edition

**Authors:** Don R. Hansen, Maryanne M. Mowen