Question

The following data shows the quarterly profit (in thousands of dollars) made by a particular company in the past 3 years.

Year Quarter Profit ($1000s)
1 1 45
1 2 51
1 3 72
1 4 50
2 1 49
2 2 45
2 3 79
2 4 54
3 1 42
3 2 58
3 3 70
3 4 56


Required:
a. Construct a time series plot. What type of pattern exists in the data?
b. Develop a three-period moving average for this time series. Compute MSE and a forecast of profit (in $1000s) for the next quarter.

Answer 1

208.82 ; 61.33

Explanation:

Given the data:

Year Quarter Profit ($1000s)

1 1 45

1 2 51

1 3 72

1 4 50

2 1 49

2 2 45

2 3 79

2 4 54

3 1 42

3 2 58

3 3 70

3 4 56

The 3 period moving average :

Yr Qtr Profit ($1000s)Pt ____ Ft ____ e=(PT-Ft)²

1 _ 1 ___45 __

1 _ 2 __ 51 __

1 _ 3 __ 72 __

1 _ 4 __ 50 ______________56 ____ 36

2 _ 1 __ 49 ______________57.67__ 75.17

2 _ 2__ 45 ______________57 ____ 144

2 _ 3__ 79 ______________48 ____961

2 _ 4__ 54 ______________57.67 _ 13.47

3 _ 1__ 42 ______________59.33__300.33

3 _2 __ 58 ______________58.33__ 0.11

3 _ 3__ 70 ______________51.33__ 348.57

3 _ 4 __56 ______________56.67__0.45

MSE = Σ(Pt - Ft)² ÷ n

MSE = (36+75.17+144+961+13.47+300.33+0.11+348.57+0.75) ÷ 9

= 208.82

Forecast for next quarter :

(58 + 70 + 56) / 3 = 184 /3 = 61.33