Reference no: EM13954328
For years The Glass Slipper restaurant has operated in a resort community near a popular ski area of New Mexico. The restaurant is busiest during the first 3 months of the year, when the ski slopes are crowded and tourists flock to the area.
When James and Deena Weltee built The Glass Slipper, they had a vision of the ultimate dining experience. As the view of surrounding mountains was breathtaking, a high priority was placed on having large windows and providing a spectacular view from anywhere inside the restaurant. Special attention was also given to the lighting, colors, and overall ambiance, resulting in a truly magnificent experience for all who came to enjoy gourmet dining. Since its opening, The Glass Slipper has developed and maintained a reputation as one of the "must visit" places in that region of New Mexico.
While James loves to ski and truly appreciates the mountains and all that they have to offer, he also shares Deena's dream of retiring to a tropical paradise and enjoying a more relaxed lifestyle on the beach. After some careful analysis of their financial condition, they knew that retirement was many years away. Nevertheless, they were hatching a plan to bring them closer to their dream. They decided to sell The Glass Slipper and open a bed and breakfast on a beautiful beach in Mexico. While this would mean that work was still in their future, they could wake up in the morning to the sight of the palm trees blowing in the wind and the waves lapping at the shore. They also knew that hiring the right manager would allow James and Deena the time to begin a semi-retirement in a corner of paradise.
To make this happen, James and Deena would have to sell The Glass Slipper for the right price. The price of the business would be based on the value of the property and equipment, as well as projections of future income. A forecast of sales for the next year is needed to help in the determination of the value of the restaurant. Monthly sales for each of the past 3 years are provided in the table below.
Discussion Question
1. Prepare a graph of the data. On this same graph, plot a 12-month moving average forecast. Discuss any apparent trend and seasonal patterns.
2. Use regression to develop a trend line that could be used to forecast monthly sales for the next year. Is the slope of this line consistent with what you observed in Question 1? If not, discuss a possible explanation.
3. Use the multiplicative decomposition model on these data. Use this model to forecast sales for each month of the next year. Discuss why the slope of the trend equation with this model is so different from that of the trend equation in Question 2.
4. Based on these data, which model is better and why?
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