Case Problem FORECASTING LOST SALES: ‘The Carlson Departinent Store suffered heavy damage when a hurricane struck on August 3{, 1996, The store was closed for 4 months (September 1996 through December 1996); and Carlson is now involved in a dispute with its insurance company conceming the amount of lost sales during the time the store was closed. TWo key issues must be resolved (1) the amount of sales Carlson would have made if the hurricane had not struck; and (2) whether Carlson is entitled {o any compensation for excess sales from increased busiz ness activity after the storm, More than $8 billion in federal disaster relief and insurance money came ing the: county, resulting in increased sales at department stores and numer ous other businesses. “Table 16.15 shows the sales data forthe 48 months preceding the storm. The U.S. De- partment of Commerce also has published total sales fo the 48 months preceding the storin, for all department stores in the county, as well as the total sales in the county for the 4 ‘months the Carlson Department Store was closed. Table 16.16 shows these data. Manage- TABLE 16.15 SALES FOR CARLSON DEPARTMENT STORE, SEPTEMBER 1992 ‘THROUGH AUGUST 1996 —_—_—_—$——— Month 1992 1993 1995 1996 Jan, 145, 231 256 Feb, L80 199 2.28 Mar. 2.03 242 2.69 Apr. 199 245 248 May 232 257 273 June 220 242 237 July 213 240 231 Aug. 2.43 250 223 Sept. 17 190 209 Oct. 190 213 254 Nov. 274 2.56 291 Dee. 420 416 435Chopier 16 Forecasting TABLE 16.16 DEPARTMENT STORE SALES FOR THE COUNTY, SEPTEMBER 1992 ‘THROUGH DECEMBER 1996 —<$— $$ —— ‘Month 1992 1993 1994 1995, 1996 468 46.8 43.8 48.0 48.0 48.6 456 516 60.0 594 516 516 516 58.2 534 58.2 618 60.6 56.4 60.0 58.2 55.2 52.8 57.0 56.4 51.0 54.0 516 63.0 58.8 60.6 618 55.8 516 49.8 474 69.0 564 534 54.6 346 75.0 M4 Na 65.4 618 85.2 1176 140 102.0 100.2 i218 ‘ment has asked you to analyze these data and develop estimates of the lost sales atthe Catl- son Department Store for the months of September through December 1996. Management also has asked you to determine whether a case can be made for excess storm-related sales during the same period. If such a case can be made; Carlson is entitled to compensation for excess sales it would have earned in addition to ordinary sales. Managerial Report Prepare areport for the management ofthe Carlson Department store that summarizes your findings, forecasts, and recommendations. include the following. 1. Anestimate of sales had there been no hurricane. 2. Anestimate of countywide department store sales had there been no hurricane. 3. Use the countywide actual department stores sales for September through Decem- ber 1996 and the estimate in part (2) to make a case for or against excess storm- related sales. 4. An estimate of lost sales for the Catison Department Store for September through December 1996.