Forcasting with Indices

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Forcasting with Indices

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Forecasting with Indices
Forecasting is the process of using data from previous intervals to determine future data. In this exercise, the researcher will use information from the University of Phoenix website that represents Winter Historical Inventory Data for a fictitious company (University of Phoenix, 2010). An index created from the given data and the researcher will plot each month using a scatter plot with a linear trend line. These plots, using formulas obtained from Microsoft Excel, will yield a forecast for each month.
The first step in the process is to create an index for each month by dividing the current month by the index (or first) month. For example, month one of the first year is equal to 55,200. Month one of the second year is equal to 39,800. Dividing the second year by the first year gives an index result of 0.721014. An index number smaller than one indicates a decrease in the number from the first year to the second, and an index number greater than one shows an increase from one year to the next. The following chart shows the resulting index for each month.
Month Year 1 Year 2 Year 3 Year 4 Y2 Y3 Y4
1 55,200 39,800 32,180 62,300 0.72101 0.58297 1.12862
2 57,350 64,100 38,600 66,500 1.11770 0.67306 1.15955
3 15,400 47,600 25,020 31,400 3.09091 1.62468 2.03896
4 27,700 43,050 51,300 36,500 1.55415 1.85199 1.31769
5 21,400 39,300 31,790 16,800 1.83645 1.48551 0.78505
6 17,100 10,300 31,100 18,900 0.60234 1.81871 1.10526
7 18,000 45,100 59,800 35,500 2.50556 3.32222 1.97222
8 19,800 46,530 30,740 51,250 2.35000 1.55253 2.58838
9 15,700 22,100 47,800 34,400 1.40764 3.04459 2.19108
10 53,600 41,350 73,890 68,000 0.77146 1.37854 1.26866
11 83,200 46,000 60,200 68,100 0.55288 0.72356 0.81851
12 72,900 41,800 55,200 61,100 0.57339 0.75720 0.83813
The next step in the forecasting process is to plot each of the monthly indices onto a scatter plot and to use the trend line to determine the function for finding the next month??™s indices. The following chart shows the indices.