VI SEM - PRODUCTION MANAGEMENT LAB - Code No.

: 337663 (37)

Date : PRACTICAL NO.: 6-i

SALES FORECASTING - (Least Square Method)

AIM :
To fit a trend line to the sales data.

PROCEDURE:

 A straight line trend fitted by the method of least squares will be of the general form

Y=a +bX
In which,
Y – is a dependent variable - ‘sales in Rs. or Volume’ etc.
a & b – two unknown constants whose values are determined by solving two normal equations.

X – is an independent variable representing - ‘unit of Time’.

 To determine the values of a & b, the following two normal equations have to be solved

∑ Y = Na + b ∑ X ----------------- (1)

∑XY = a ∑ X + BX2 ---------------- (2)

 Observations of Years and sales are noted down in the tabular column given below and then the forecast
is computed.

 When deviations are taken from the middle year then ∑ X = 0 and the values of a & b are determined as
follows:
a = ∑ Y / N ------------------(3)
b = ∑ XY / ∑ X2 -------------------(4)

Table for calculation of sales forecasting is as follows:

TIME PERIOD SALES X XY X2 Y = a + bX

CONCLUSION
The forecasted Sales during _______________ period will be expected as ______________.

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Department Of Mechanical Engineering, Bhilai Institute Of Technology, Durg 15