1

MN20023 Business Forecasting

Week 3
Practice Questions

Question 1

The following time series shows the average number of workers absent per day at a large
factory for each quarter for three consecutive years.

Y1 Y2 Y3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Average no.
of absentees 25 13 20 28 29 11 16 23 26 9 14 21

a) Graph the series.

b) Apply the additive decomposition model to the series

c) Calculate the trend and seasonal deviations and interpret your results.

d) Produce a crude forecast of the average number of workers who will be absent in
quarter 1 of Y4.

e) Deseasonalise the average number of absent workers for quarters 3 and 4 of Y3 and
explain what the figures represent.

Question 2

Data on the monthly sales of a company (in £000s) are given below:

Sales
Year Month (£000s)
Y1 Jan 122.0
Feb 145.3
Mar 157.6
Apr 204.8
May 253.2
Jun 256.2
Jul 310.2
Aug 450.1
Sep 284.9
Oct 159.8
Nov 100.3
Dec 83.0
Y2 Jan 145.5
Feb 153.1
Mar 181.3
 2

Apr 242.0
May 278.3
Jun 305.0
Jul 378.2
Aug 503.4
Sep 336.4
Oct 172.4
Nov 137.6
Dec 97.7
Y3 Jan 157.4
Feb 189.3
Mar 200.1
Apr 284.5
May 330.8
Jun 356.5
Jul 400.1
Aug 568.1
Sep 366.3
Oct 204.8
Nov 142.0
Dec 131.8

a) Examine the graph of the time series and decide whether to apply the additive or
multiplicative model to the data (Use your judgment to make this decision based on an
inspection of the graph).

b) Apply your chosen model to the series and interpret your results

c) Now apply more robust method (e.g. using MSE) to verify your judgment in question a)