Case Study Analysis

School of Business and Governance

Ateneo de Davao University

Submitted to :

Mr. Jose Karlo Caballero

In fulfilment for the requirements on

Math

Submitted by:

Pantojan, Aillynne Mae

Patlunag, Gwenn Aries

Saligumba, Gio Dale

Sereno, Caryll Gale

August 18, 2013

I. Introduction

The Vintage Restaurant is on Captiva Island, a resort community near Fort Myers, Florida. The
restaurant, which is owned and operated by Karen Payne, has just completed its third year of operation. During that
time, Karen has sought to establish a reputation for the restaurant as a high-quality dining establishment that
specializes in fresh seafood. The efforts by Karen and her staff have proven successful, and her restaurant has
become one of the best and fastest-growing restaurants on the island. Karen has concluded that to plan for the
growth of therestaurant in the future, she needs to develop a system that will enable her to forecast food and
beverage sales by month for up to one year in advance. Karen has the following data ($1000s) on total food and
beverage sales for the three years of operation. The data can be found in an Excel spreadsheet (Lost Beverage and
Food Sales). Perform an analysis of the sales data for the Vintage Restaurant. Prepare a report for Karen that
summarizes your findings, forecasts, and recommendations.

II. Problem Statement

Perform an analysis of the sales data for the Vintage Restaurant. Prepare a report for Karen that
summarizes your findings, forecasts, and recommendations.
Include the following:
1. A graph of the time series.
2. An analysis of the seasonality of the data. Indicate the seasonal indexes for each month,
and comment on the high and low seasonal sales months. Do the seasonal indexes make intuitive sense?
Discuss.
3. A forecast of sales for January through December of the fourth year.
4. Assume that January sales for the fourth year turn out to be $295,000. What was your forecast error? If this is a
large error, Karen may be puzzled about the difference between your forecast and the actual sales value. What can
you do to resolve her uncertainty in the forecasting procedure?
5. Recommendations as to when the system that you have developed should be updated to account for new sales
data that will occur.
6. Detailed calculations of your analysis in the appendix of your report.
III. Objective
To enable Karen to forecast food and beverage sales by month for up to one year in advance so that she
will be able to anticipate the future and develop appropriate strategies.
IV. Analysis

The time series plot is shown below:

Time Series
300

250

200

150

100

50

0
0 5 10 15 20 25 30 35 40

Month 1 = January for year 1;

month 2 =February for year 1;

and so on.

The time series plot indicates a linear trend and a seasonal pattern. The graph above shows a
straight line that may be a good approximation of the trend in Food and beverages sales. It has no consistent
increase or decrease over time and thus no trend.
2. Analysis of seasonality:

Seasonal-Irregular
Month Component Values Seasonal
Index
January 1.445 1.441 1.44
February 1.301 1.297 1.30
March 1.344 1.343 1.34
April 1.047 1.034 1.04
May 1.044 1.054 1.05
June .779 .801 .80
July .882 .834 .83
August .857 .848 .85
September .618 .638 .63
October .725 .675 .70
November .843 .862 .85
December 1.137 1.180 1.16

The deseasonalized time series is shown below:

t Deseasonalized t Deseasonalized
Sales Sales
1 168.06 19 189.16
2 180.77 20 189.41
3 173.13 21 193.65
4 171.15 22 185.71
5 175.24 23 196.47
6 175.00 24 198.28
7 174.70 25 195.83
8 178.82 26 196.15
9 174.60 27 197.76
10 185.71 28 197.12
11 178.82 29 200.00
12 177.59 30 200.00
13 182.64 31 200.00
14 183.08 32 204.71
15 184.33 33 200.00
16 185.58 34 211.43
17 183.81 35 203.53
 18 186.25 36 202.59

The trend line fitted to the deseasonalized time series is

T t = 169.499 + 1.02 t

3. Sales forecasts

Forecast for Year 4

Using T t = 169.499 + 1.02 t

Trend Seasonal Monthly

Month Forecast Index Forecast
January 207.239 1.44 298.424
February 208.259 1.30 270.737
March 209.279 1.34 280.434
April 210.299 1.04 218.711
May 211.319 1.05 221.885
June 212.339 .80 169.871
July 213.359 .83 177.088
August 214.379 .85 182.222
September 215.399 .63 135.701
October 216.419 .70 151.493
November 217.439 .85 184.823
December 218.459 1.16 253.194

4.. Forecast error = $295,000 - $298,424 = -$3,424

The forecast we developed over predicted by $3,424; this represents a very small error.V.
Solutions

Month Seasonal Index

January 1.445+1.441/2 1.44
February 1.301+1.297/2 1.30
March 1.344+1.343/2 1.34
April 1.047+1.034/2 1.04
May 1.044+1.054/2 1.05
June .779+.801/2 .80
July .882+.834/2 .83
August .857+.848/2 .85
September .618+.638/2 .63
October .725+.675/2 .70
November .843+.862/2 .85
December 1.137+1.180/2 1.16

t Deseasonalized t Deseasonalized
Sales Sales
1 168.06=242/1.44 19 189.16=157/.83
2 180.77=235/1.30 20 189.41=161/.85
3 173.13=232/1.34 21 193.65=122/.63
4 171.15=178/1.04 22 185.71=130/.70
5 175.24=184/1.05 23 196.47=167/.85
6 175.00=140/.80 24 198.28=230/1.16
7 174.70=145/.83 25 195.83=282/1.44
8 178.82=152/.85 26 196.15=255/1.30
9 174.60=110/.63 27 197.76=265/1.34
10 185.71=130/.70 28 197.12=205/1.04
 11 178.82=152/.85 29 200.00=210/1.05
12 177.59=206/1.16 30 200.00=160/.80
13 182.64=263/1.44 31 200.00=166/.83
14 183.08=238/1.30 32 204.71=174/.85
15 184.33=247/1.34 33 200.00=126/.63
16 185.58=193/1.04 34 211.43=148/.70
17 183.81=193/1.05 35 203.53=173/.85
18 186.25=149/.80 36 202.59=235/1.16

Trend Forecast Seasonal Monthly Forecast

Month Index
January 207.239= 1.44 298.424= 207.239*1.44
169.499+1.02(37)
February 208.259= 1.30 270.737=208.259*1.30
169.499+1.02(38)
March 209.279= 1.34 280.434=209.279*1.34
169.499+1.02(39)
April 210.299= 1.04 218.711=210.299*1.04
169.499+1.02(40)
May 211.319= 1.05 221.885=211.319*1.05
169.499+1.02(41)
June 212.339= .80 169.871=212.339*.80
169.499+1.02(42)
July 213.359= .83 177.088=213.359*.83
169.499+1.02(43)
August 214.379= .85 182.222=214.379*.85
169.499+1.02(44)
September 215.399= .63 135.701=215.399*.63
169.499+1.02(45)
October 216.419= .70 151.493=216.419*.70
 169.499+1.02(46)
November 217.439= .85 184.823=217.439*.85
169.499+1.02(47)
December 218.459= 1.16 253.194=218.459*1.16
169.499+1.02(48)

Suppose the actual January sales for the fourth year turn out to be $295,000. The forecasted January sales are
$296,458.
Forecast error = $295,000 - $298,424 = -$3,424

VI. Conclusion

Karen does not have to worry about the error and she can be assured that her forecast model is
extremely good. She has to update the data monthly to have a better understanding of the pattern of past
sales, leading to better prediction of the future sales for the product. The analysis can be easily
updated each month, especially if a computer software package is used to perform the
analysis.