Assignment-1

Question-1: Listed below is the net sales in $ million for home Depot, Inc. and its subsidiaries
from 1997 to 2006.
Table 1: Net sales of different years
Year
Net Sales ($)
Year
Net Sales ($)
1997
50,600
2002
156,700
1998
67,300
2003
201,400
1999
80,800
2004
227,300
2000
98,100
2005
256,300
2001
124,400
2006
280,900
Note: Add last three digits of your ID with Net Sales
i)
ii)

Determine the least square equation. On the basis of this information, what are the
estimated sales for 2010?
Plot Net Sales and Trend Line
Answer

Using Excel we get,

Year

Net sales($)

Time, t

ID(207)+Net sales($)

Y= a+bt

1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

50600
67300
80800
98100
124400
156700
201400
227300
256300
280900

1
2
3
4
5
6
7
8
9
10

50807
67507
81007
98307
124607
156907
201607
227507
256507
281107

32666.7
59759.7
86852.7
113945.7
141038.7
168131.7
195224.7
222317.7
249410.7
276503.7

i) The least square equation for Net sales ($) is, Y = a + bt = 5573.6+27093.3t
Here,Y is sales in millions of dollars (the projected value of the Y variable for a selected value
of t).
The value 5573.6 is the intercept with the Y axis i.e. the estimated value of sales in the year 0 or
base year (1996) (the estimated value of where the line crosses the Y-axis when t is zero).
The value 27093.6 is the slope of the line which tells us that sales increased at a rate of 27093.3
per year (the average change in Y for each increase of one unit in t)

Thus on the basis of past sales the estimated or expected or projected sales for 2010 will be
Y = a + bt = 5573.7+27093*14
= 384875.7($) million.

ii)
Figure: Plot Net Sales and Trend Line

Comment:From the Plot of Net Sales and Trend Line,we see that Vertical axis represents Year
and horizontal axis represents the Net sales and it indicates a linear trend.

Question-2: It appears that the imports of carbon black have been increasing by about 10 percent
annually
Table 2: Amount of Carbon Block imported in different years
Imports of Carbon Block
(thousands of tons)
124
175
306
524
714
1052

Year
1990
1991
1992
1993
1994
1995
1996
i)
ii)
iii)

Year
1997
1998
1999
2000
2001
2002
2003

Imports of Carbon Block

(thousands of tons)
2463
3358
4181
5388
8027
10587
13537

1638
Note: Add last three digits of your ID with imports of Carbon Block

Determine the logarithmic trend.

Find the annual rate of increase.
Estimate imports for the year 2006.
Answer

Using Excel we get,

Year

Imports of Carbon Block

(thousands of tons)

ID207+Imports of
carbon(Y)

Time,t

logY

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003

124
175
306
524
714
1052
1638
2463
3358
4181
5388
8027
10587
13537

331
382
513
731
921
1259
1845
2670
3565
4388
5595
8234
10794
13744

1
2
3
4
5
6
7
8
9
10
11
12
13
14

2.519828
2.582063
2.710117
2.863917
2.96426
3.100026
3.265996
3.426511
3.55206
3.642267
3.7478
3.915611
4.033182
4.138113

i) The logarithmic trend equation is, log Y = log a + log b(t ) = 2.3471+.1295(t), which is in

the log form.

Chart: Amount of Carbon Block imported in

different years
4.5
4

y =0.1295x+2.3471

3.5
3
logY

2.5

Log. (logY)

2
1.5

Linear (logY)

1
0.5
0
0

10

15

ii) Here, intercept, loga = 2.347104 and slope, logb=.129546

So the antilog of .129546 is 1.347.
Subtracting 1 yields .347 which is the geometric mean of annual rate of increase.
So we may conclude that imports of carbon block increased at a rate of 34.7 percent annually
during the period (1990-2003).The annual rate of increase is 34.7 % i.e; the import of the next
year will 34.7% more than the previous year.

ii) The estimated sales for the year 2006 will be

logY =2.3471+0.1295(t) =2.3471+.1295*17 = 4.549386
The antilog of 4.549386 is 34673.68
Thus the estimated sales for the year 2006 will be about 34673.68 thousands of tons.

Question-3:
The quarterly production of pine lumber, in millions of board feet, by Northwest lumber
since 1998 is:
Table 3: Productions in different quarters of several years
Year

Quarter

Production

Year

Production

Sales

Year

Quarter

Production

1998

Winter

90

2001

Winter

201

2004

Winter

265

Spring

85

Spring

142

Spring

185

Summer 56

Summer

110

Summer 142

Fall

102

Fall

274

Fall

333

Winter

115

Winter

251

Winter

282

Spring

89

Spring

165

Spring

175

Summer 61

Summer

125

Summer 157

Fall

110

Fall

305

Fall

350

Winter

165

Winter

241

Winter

290

Spring

110

Spring

158

Spring

201

Summer 98

Summer

132

Summer 187

Fall

Fall

299

Fall

1999

2000

248

2002

2003

2005

2006

400

Note: Add last three digits of your ID with number of Productions

i)
ii)
iii)

Develop a seasonal index for each quarter and interpret.

Project the production for 2007 and also find the base year production.
Plot the original data and Deseasonalized data and interpret.

i)

Computations needed for specific seasonal indexes

Yea Quarter Production Four-quarter

r
total
1998 Winter
90
Spring
85
333
Summer
56
358
Fall
102
362
1999 Winter
115
367
Spring
89
375
Summer
61
425
Fall
110
446
2000 Winter
165
483
Spring
110
621
Summer
98
657
Fall
248
689
2001 Winter
201
701
Spring
142
727
Summer
110
777
Fall
274
800
2002 Winter
251
815
Spring
165
846
Summer
125
836
Fall
305
830
2003 Winter
241

Four-quarter
moving average

Centered moving
average

Specific
seasonal

86.375

0.648335745

90

1.133333333

91.125

1.262002743

92.75

0.959568733

100

0.61

108.875

1.010332951

116.125

1.42088267

138

0.797101449

159.75

0.613458529

168.25

1.473997028

173.75

1.156834532

178.5

0.795518207

188

0.585106383

197.125

1.389980977

201.875

1.243343653

207.625

0.794701987

210.25

0.594530321

208.25

1.464585834

210.5

1.144893112

83.25
89.5
90.5
91.75
93.75
106.25
111.5
120.75
155.25
164.25
172.25
175.25
181.75
194.25
200
203.75
211.5
209
207.5

854
Spring

881
Summer

132

Fall

299

891
925
2004

Winter

265

Spring

185

942
932
Summer

142

Fall

333

947
964
2005

Winter

282

Spring

175

972
998
Summer

157

Fall

350

1028
1078
2006

Winter

213.5

158

216.875

0.728530259

221.5

0.595936795

227

1.317180617

233.375

1.135511516

234.25

0.789754536

234.875

0.604576903

238.875

1.394034537

242

1.165289256

246.25

0.710659898

253.25

0.61994077

263.25

1.329534663

134.75

2.152133581

220.25
222.75
231.25
235.5
233
236.75
241
243
249.5
257
269.5

290

Seasonal index for quarter (winter, spring, summer& fall)

Quarter

Year

winter

spring

1998
1999
2000
2001
2002
2003
2004
2005
2006
Total
Mean
Adjusted
Index

1.26200274
3
0.95956873
3
1.15683453
2
1.24334365
3
1.14489311
2
1.13551151
6
1.16528925
6
2.15213358
1
10.2195771
3
1.27744714
1
1.27837294
5
127.837294
5

0.95956873
3
0.79710144
9
0.79551820
7
0.79470198
7
0.72853025
9
0.78975453
6
0.71065989
8

5.57583507
0.79654786
7
0.79712514
9
79.7125149

summer
Fall
0.648335 1.13333333
7
3
1.01033295
0.61
1
0.613458 1.47399702
5
8
0.585106 1.38998097
4
7
0.594530 1.46458583
3
4
0.595936 1.31718061
8
7
0.604576 1.39403453
9
7
0.619940 1.32953466
8
3
4.871885
4
0.608985
7
0.609427
60.94270
3

10.5129799
4
1.31412249
2 3.997103
1.31507487
6
4
131.507487
6

Interpretation
So the index for winter quarter is 127.83 ie; The quarterly production of pine lumber, in millions
of board feet, by Northwest lumber for the winter quarter is 27.83 above the typical quarter.
So the index for spring quarter is 79.7125149 ie The quarterly production of pine lumber, in
millions of board feet, by Northwest lumber for the spring quarter is 21 below the typical
quarter.
So the index for summer quarter is 60.942703 ie; The quarterly production of pine lumber, in
millions of board feet, by Northwest lumber for the summer quarter is 40 percent below the
typical quarter.
So the index for Fall quarter is 131.5074876ie; The quarterly production of pine lumber, in
millions of board feet, by Northwest lumber for the Fall quarter is 31.50 above the typical
quarter.

ii) Using Deseasonallized data to forecast

Year Quarter Production
1998 winter
90
spring
85
summer
56
fall
102
1999 winter
115
spring
89
summer
61
fall
110
2000 winter
165
spring
110
summer
98
fall
248
2001 winter
201
spring
142
summer
110
fall
274
2002 winter
251
spring
165
summer
125
fall
305
2003 winter
241
spring
158
summer
132
fall
299
2004 winter
265
spring
185
summer
142
fall
333
2005 winter
282
spring
175
summer
157
fall
350

Seasonal index
1.278372945
0.797125149
0.609427031
1.315074876
1.278372945
0.797125149
0.609427031
1.315074876
1.278372945
0.797125149
0.609427031
1.315074876
1.278372945
0.797125149
0.609427031
1.315074876
1.278372945
0.797125149
0.609427031
1.315074876
1.278372945
0.797125149
0.609427031
1.315074876
1.278372945
0.797125149
0.609427031
1.315074876
1.278372945
0.797125149
0.609427031
1.315074876

Deseasonalized Production
70.40199058
106.6331932
91.88959004
77.56212355
89.95809907
111.6512258
100.0940177
83.64542736
129.0703161
137.9958971
160.8067826
188.582418
157.2311123
178.140158
180.497409
208.3531554
196.3433293
206.9938456
205.110692
231.9259577
188.5208859
198.2122885
216.5968908
227.3634798
207.29475
232.0840087
233.0057462
253.217521
220.5929038
219.5389271
257.6190292
266.1445416

2006 winter
spring
summer
fall

290
201
187
400

1.278372945
0.797125149
0.609427031
1.315074876

226.8508585
252.1561392
306.8455953
304.1651904

Deseasonalized production
350

y =5.7464x +80.445

Production

300
250
200

Deseasonalized
Production

150
100

Linear (Deseasonalized
Production)

50
0
0

10

20

30

40

Year

Projection of the production for 2007

Year

2007

Quarter

time

Forcast production

winter

37

293.0618

spring

38

298.8082

summer

39

304.5546

fall

40

310.301

and also the base year production is 80.445 (millions)

iii) Plot of original and deseasonalized Production

Plot of original & deseasonalized production

450

Production

400
350
300

Original Production

250

Deseasonalized
Production

200
150
100
50
0
1 3 5 7 9 11 13 15 17 19 21 23 25 2729 31 33 35
Year

Interpretation
From the graph we see that in the original production of of pine lumber, in millions of board feet,
by Northwest lumber shows lots of fluctuations due to seasonal variations and in the
deseasonalized production we see that the existing seasonal flucations has removed so that the
trend and cycle can be studied.
It is clear that removing the seasonal factor allows us to focus on the overall long-term trend of
production.Now we will also be able to determine the regression equation of the trend data and
use it to forecast future production.