The following is the sales (in Rs. Lakh) data of hand pumps. Find out what can be the likely value of sales in the year 2003 A.D

Question: The following is the sales (in Rs. Lakh) data of hand pumps. Find out what can be the likely value of sales in the year 2003 A.D

YearSales (in R Lakh)
199680
199790
199892
199983
200094
200199
200292

Solution:

Let us fit a straight line trend Y = a + bt

MBA Solution homework

From the above calculations, we get

solution

Hence, the trend line for the sales of hand pumps is Y =
90 + 2t

If, t = 4 (i.e., year 2003 A.D.), Y = 90 + 2(4) = Rs 98 lakh

The trend values for other years are given in the following table:

YearSales (In Rs. Lakh)
196684
199786
199888
199990
200092
200194
200296

The method of least squares is the most popular and is one of most accurate methods of demand forecasting; particularly, for long-run demand projections, because of its simplicity and inexpensiveness. One can predict the demand for any period or sub period in the future. However, it cannot satisfactorily explain market fluctuations of trade cycles