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Least Square Method

The document describes using the least squares method to forecast sales for the year 2011 based on sales data from 2005 to 2009. It lists the annual sales figures and calculates the necessary variables, finding the slope b to be 9 and the y-intercept a to be 70. Plugging these values and the x-value of 4 for 2011 into the least squares equation, it forecasts sales for 2011 to be 106.

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Ankita Bhattacharya
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88 views5 pages

Least Square Method

The document describes using the least squares method to forecast sales for the year 2011 based on sales data from 2005 to 2009. It lists the annual sales figures and calculates the necessary variables, finding the slope b to be 9 and the y-intercept a to be 70. Plugging these values and the x-value of 4 for 2011 into the least squares equation, it forecasts sales for 2011 to be 106.

Uploaded by

Ankita Bhattacharya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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NUMERICAL ON LEAST

SQUARE METHOD
QUESTION:
YEAR

SALES

2005

50

2006

70

2007

60

2008

80

2009

90

Assume the same relationship holds true


for future. Forecast the sales of the year
2011 by applying Least Square Method.

Answer:
Consider the middle year (here 2007) as
original
2
Year

Sales
(Y)

X
(where
X=
yearoriginal
)

XY

2005

50

20052007=
-2

-100

2006

70

-1

-70

2007

60

2008

80

80

2009

90

180

X2 =
10

XY= 90

Y= 350 X= 0

Now, We know:
Sales Y= a + b X
So, In order to obtain Y, first we need to find the
value of a & b. And to find the value of a, we have
to use the following equation:
Y = Na + b X where N= number of years
=> 350 = 5a + b0
=> 350= 5a+0
=> a=70

Now, to find the value of b, we have to use


the following equation:
XY = a X + bX2
=> 90 = (70 0) + (b 10)
=> 90 = 0 + 10b
=> b = 9
Now we can find the sales of the year 2011 by
putting the values of a, b & X in using the
following equation:
Y2011= a + bX
Y2011= 70 + 9(2011-2007)
Y2011= 70+ (9 4)
= 70+36= 106

THANK YOU

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