The following model is used for forecasting the sales of ice creams (in thousand dollars) and was established using quarterly data from the quarter index t=1 at Quarter 1, 2016: Tt=16.175+2.43t Assuming a multiplicative model, the seasonal indices have been calculated: [table]
Q1 | 1.096 Q2 | 1.015 Q3 | 0.834 Q4 | 1.055
[/table] Using trend and seasonality, the sales forecast for the fourth quarter of 2021 is Answer Question 5[input]thousand dollars (provide your answer to 2 decimal places).

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BlackTom AI · Accepted Answer

The question describes a forecasting setup where the underlying model combines a trend component with seasonal factors under a multiplicative scheme. We will restate the given pieces and then walk through how to compute a forecast step by step.

- Model form: multiplicative trend-seasonality model. Forecast for a given period = Trend component × Seasonal index for that quarter.
- Trend specification: T_t = 16.175 + 2.43 t, where t is the time index with t = 1 corresponding to 2016 Q1.
- Seasonal indices by quarter (multiplicative factors):
  Q1 = 1.096, Q2 = 1.015, Q3 = 0.834, Q4 = 1.055.

To forecast the fourth quarter of 2021, we need the appropriate t value for 2021 Q4, then compute the trend forecast T_t, and finally adjust by the Q4 seasonal index.

Step-by-step analysis of the calculation path:
- Determine the time index t for 2021 Q4:
  Since t = 1 at 2016 Q1 and each subsequent quarter increases t by 1, we count the quarters from 2016 Q1 up to 2021 Q4. The time index for 2021 Q4 is the number of quarters elapsed from 2016 Q1 to 2021 Q4 plus 1. Depending on how one counts (whether including both endpoints in the same way), common conventions yield t values around 24–25 for 2021 Q4. Clarifying conventions matter, but in many classroom setups t = 25 is used for 2021 Q4.
- Compute the trend forecast using t = 25 (if that is the chosen index):
  T_25 = 16.175 + 2.43 × 25 = 16.175 + 60.75 = 76.925.
  If instead t = 24 is used, T_24 = 16.175 + 2.43 × 24 = 16.175 + 58.32 = 74.495.
- Apply the seasonal index for Q4:
  Forecast = T_t × S_Q4, where S_Q4 = 1.055.
  With t = 25: Forecast = 76.925 × 1.055 ≈ 81.16.
  With t = 24: Forecast = 74.495 × 1.055 ≈ 78.66.
- Note on rounding: the final result would be reported to two decimal places, as the prompt requires, so the values above would be rounded accordingly (e.g., 81.16 or 78.66 thousand dollars), depending on the exact t used.

Alternate considerations and potential pitfalls:
- If one misidentifies t for 2021 Q4 (e.g., using t = 26 or t = 23), the trend component changes accordingly, which then propagates through the multiplication by the Q4 seasonal factor, giving a different forecast.
- Some formulations might combine the trend and seasonality adjustments in a slightly different normalization (e.g., using a detrended base then re-applying seasonality), but the problem statement explicitly states a multiplicative model with the given T_t and seasonal indices, so the straightforward product is the intended approach.

In summary, the procedure is: pick the correct t for 2021 Q4, compute T_t from T_t = 16.175 + 2.43 t, and multiply by the Q4 seasonal index of 1.055 to obtain the quarterly sales forecast in thousand dollars. The exact numeric result will depend on the exact t-value used for 2021 Q4, which hinges on the counting convention between 2016 Q1 and 2021 Q4.

ETX5900 - S2 2025 Take Home Quiz Week 11 (due on 24th of October)

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