Question : Forecasting - Linear Regression
A manufacturer is developing a facility plan to provide production capacity for its factory. The amount of capacity required in the future depends on the number of products demanded by its customers. The data below reflect past sales of its roducts:
|
Year
|
Annual Sales (number of products)
|
Year
|
Annual Sales (number of products)
|
|
1
|
490
|
5
|
461
|
|
2
|
487
|
6
|
475
|
|
3
|
492
|
7
|
472
|
|
4
|
478
|
8
|
458
|
a) Use simple linear regression to forecast annua demand for the products for each of the next three (3) years, by using the tabular method to:
i. derive the values for the intercept and slope
ii. derive the linear equation
iii. plot the linear regression line , and
iv. develop a forecast for the firm's annual sales for each of the next three years
b) Repeat the forecast using excel software to :
i. plot the normal graph with the regression trend line using the raw data provided
ii. indicate the linear regression equation on the graph
iii. extrapolate the regression trend line to forecast the firm's sales for each of the next three years.