You are on page 1of 17

Table of Contents:

Chapter I

Introduction……………………………………………………………2

Objectives……………………………………………………………..3

Scope and Limitations………………………………………………..3

Chapter II

Methodology…………………………………………………………...4

Chapter III

Description of the Firm……………………………………………….6

Chapter IV

Analysis of Data……………………………………………………….7

SWOT Analysis……………………………………………………….15

Chapter V

Summary………………………………………………………………17

Conclusions…………………………………………………………….17

Recommendations……………………………………………………..17

1|Page
Chapter I
Introduction

In business of any field, anticipating the needs of your clients and serving these
needs, definitely spell success. A good management team uses past and present data,
analyzes the trend of the current situation, and still relies on “gut feeling” on what is
likely to happen in the future, Decisions are made every day, and coming up with the best
strategic plan of action in the future is an essential tool. Consequently, managers try to
minimize the “uncertainty” of the future in forecasting. A forecast simply means
prediction of what is likely to happen in the future. Converting the prediction into
numbers and concrete data is the main purpose of forecasting. A forecast is an estimate of
the future level of some variable. That variable is most often demand but could also be
supply or price. Most companies forecast in order to help the firm in strategic planning
activities such as inventory purchasing, capacity planning, labor planning, etc. It is the
technique of estimating the relevant future events and problems on the basis of past &
present data.

There are two types of forecasting: Business Forecasting and Demand


Forecasting. Business forecasting is an estimate or prediction of future developments in
business such as sales, expenditures, revenues, income, and profits. It is considered as
one of the most important aspect of corporate planning. While Demand forecasting is a
forecast that projects the company’s sales. Also forecast can be Qualitative or
Quantitative. In Qualitative methods, it consists of Dolphi Method, Jury of Executive,
Sales Force Composite and Consumer Market Survey. In Quantitative Methods, it is
classify into two methods: Time Series Method which consist of Moving Average
method, Exponential Smoothing method and Trend Projections while the other one which
is Casual methods consists of Regression Analysis and multiple Analysis method.

2|Page
Objectives:
 To improve organizational performance: more revenue, more profit, and increase
customer satisfaction.
 To forecast the succeeding year’s sales using the trend line formula
 To identify what decisions will be made using the information from the forecast
 To identify uncertainties matter for these decisions
 To provide possible strategic plans in the future
 To eliminate the possible threats for the business
 To increase sales and lessen the problems to be encountered

Scope and Limitations:

This case study is limited only on forecasting using trend line formula only that will help
a lot of businesses or people who wants to predict their future performance and to know if they
will earn profit or not. The study will discuss about a company that wants to know if they will
earning profit for the next year. The researchers will be using trend line formula to calculate of
forecast the future performance of this company.

3|Page
Chapter II
Methodology

These are the process to follow in forecasting:

1. Establish the objective of the forecast being aimed for.


The objective of this case study is to identify and forecast the next year’s sales of
Sweets and Loves business.
2. Choose the items / quantities to be forecasted
The quantity to be forecasted is the sales every month for the next year.
3. Determine the period of time to be forecasted
This case study will forecast the sales for every month. Every month because the
business wants a narrow and accurate result that will be forecasted.
4. Decide on forecasting technique
In this case study, Trend line forecast will be used. This technique fits a trend line
to a series of historical data points and then projects the line in the future for medium to
long range forecast (focused on the straight line trends only). The common statistical
method to be used is known as the Least Squares Method.
The Least Square Method finds a straight line that minimizes the sum of the
vertical differences from the line to each of the data points.

The Linear Trend Equation

̅
Y = a + btx

Where:

̅ = computed value of the variable to be predicted (dependent variable)


Y

a = intercept of the trend line (Y-axis intercept)

b = slope of the trend line


4|Page
t𝑥 = independent variable

The formula in computing a and b is:

∑ 𝑡𝑦−𝑛𝑡̅𝑦̅
𝑎 = 𝑌̅ - 𝑏𝑡̅ 𝑏= ̅̅̅̅
∑(𝑡)2 −𝑛(𝑡) 2

∑ = Summation sign for 𝑛 data points

𝑡 = Values of the independent variables

Y = Values of the dependent variables

𝑡̅ = Average of the values of the X’s

𝑌̅ = Average of the values of the Y’s

𝑛 = number of data points or observations

5. Gather the data needed


The Company provides the data needed to forecast their sales for the next year.
Including on the data are the sales every month of the year.
6. Utilize the forecasting Method
Use the forecasting Method appropriately for the said case study to achieve the
right and accurate result.
7. Make the forecast
Do the forecasting method that have been chose for this case study
8. Apply the forecasting result
After using the method, apply the forecast or the result of your study to the
business to achieve what the company wants.

5|Page
Chapter III
Description of the Firm

AMRL Corporation is a newly created company owned by Angelica Labii and


Paolo Rumbaoa. They are selling unique products that will surely capture the attention of
the consumer. This products composed of sweets like ice cream, candies etc. in unique
combinations of flavors that you have never been taste or seen before. They think of a
way that will surely give them a profit and not a loss. Both of them are engaged to
businesses like café, Noodle House, etc. In simpler words, they are engaged in food
business.
The investors invest high amount of money because they believe that this will
probably earn a lot of profit. And because of the investment, they have the capital to
produce the products they will going to sell. Next is they look for a location that is
crowded of people like in Quiapo, Baclaran, or maybe malls that will surely get an
attention of their products. They selected to locate their business in the mall because they
believe that malls will never lose people on it. The mall that they chose is named
Robinson’s Galleria located at BCG, Taguig City. After that, they hire 10 employees only
to work for their company but if they will notice that their business is earn then they will
hire more workers. They assign two people to manage their business and the others are to
produce their products and sell them in the mall. Their Shop is named “Sweets and
Loves” that will catch attention to their customers.
On their first year, the company had sold 100,000 pcs. of ice cream, 50,000 pcs.
of different kinds of chocolates and 100,000 bottles of juices, 40,000 cups of coffee,
500,000 pcs. of assorted candies, etc. After checking the inventory, few are only left in
their storage. Because of that, they will continue their business because it has captured
the attention of the customers and lead to a high demand on it. They are also planning to
add sandwiches on their menu on the next year.

6|Page
Chapter IV
Analysis of Data

The Problem provided by the researchers is about AMRL Corporation who wants to
forecast their future sales by the next year. Also want to know what are the steps, strategies, or
procedure to be done or need to do to maintain or exceeds the profit they have earned for this
year.

PROBLEM:

Amiela, the Sales Director of AMRL Corporation, wants to forecast the sales of Sweets
and Loves Business on a monthly basis. She wants to forecast the monthly sales for next year.
He thinks that there is a linear trend of the monthly sales over time.

This year, the sales for the month of January is 70,000, February is 75,000 , March is
79,000 , April is 80,000 , May is 75,000 , June is 87,000 , July is 90,000 , August is 85,000 ,
September is 95,000 , October is 100,000 , November is 105,000 and December is 108,000. The
figures are summarized in Table 1.1

Should Amiela use the trend projection technique? What is the forecast on the monthly
sales next year?

7|Page
Table 1.1 Monthly Sales

Month Sales
(This Year) (000)

January 10
February 11
March 13
April 15
May 13
June 16
July 20
August 21
September 18
October 22
November 30
December 35

8|Page
Step 1: Plot the Sales over time to determine if there is an apparent linear trend

There seems to be a positive linear trend between the monthly sales and the time period.

Figure 1.1 Monthly Sales

AMRL Corporation
40
35
30
Sales (000)

25
20
15
10
5
0

Month

Step 2: Determine the trend formula

The Linear Trend Equation

𝑌̅ = a + bt𝑥

Where:

𝑌̅ = computed value of the variable to be predicted (dependent variable)

a = intercept of the trend line (Y-axis intercept)

b = slope of the trend line

9|Page
t𝑥 = independent variable

The formula in computing a and b is:

∑ 𝑡𝑦−𝑛𝑡̅𝑦̅
𝑎 = 𝑌̅ - 𝑏𝑡̅ 𝑏= ̅̅̅̅
∑(𝑡)2 −𝑛(𝑡) 2

∑ = Summation sign for 𝑛 data points

𝑡 = Values of the independent variables

Y = Values of the dependent variables

𝑡̅ = Average of the values of the X’s

𝑌̅ = Average of the values of the Y’s

𝑛 = number of data points or observations

Process:

1. Assign a time period for each month :


1 = January (this year)
2 = February (this year)
3 = March (this year)
4 = April (this year)
5 = May (this year)
6 = June (this year)
7 = July (this year)
8 = August (this year)
9 = September (this year)
10= October (this year)
11= November (this year)
12= December (this year)

10 | P a g e
2. Compute the square of each time period (𝑡) :
12 = 1
22 = 4
32 = 9
42 = 16
52 = 25
62 = 36
72 = 49
82 = 64
92 = 81
102 = 100
112 = 121
122 = 144

3. Compute the product of the time period (𝑡) and sales (Y) :
1 (10) = 10
2 (11) = 22
3 (13) = 39
4 (15) = 60
5 (13) = 65
6 (16) = 96
7 (20) = 140
8 (21) = 168
9 (18) = 162
10 (22) = 220
11 (30) = 330
12 (35) = 420

11 | P a g e
4. Compute the sum of each row/ set:
Row 2 = 1+2+3+4+5+6+7+8+9+10+11+12 = 78
Row 3 = 10+11+13+15+13+16+20+21+18+22+30+35 = 224
Row 4 = 1+4+9+16+25+36+49+64+81+100+121+144 = 650
Row 5 = 10+22+39+60+65+96+140+168+162+220+330+420 = 1732
5. Compute the average period (𝑡) and average sales (Y) :
𝑡̅ = ∑ 𝑡/n
= 78/ 12
= 6.50
Y= ∑ Y/n
= 1049/12
= 20.50

6. Compute the slope of the line (b):


∑ 𝑡𝑦−𝑛𝑡̅𝑦̅
𝑏= ̅̅̅̅
∑(𝑡)2 −𝑛(𝑡) 2

1732−12(6.50)(20.50)
=
650−12(6.50)2

= 0.93
7. Compute the Y- intercept (a)
𝑎 = 𝑌̅ - 𝑏𝑡̅
= 20.50 − 0.93(6.50)
= 14.46
8. The trend formula of the sales forecast (𝑌) is :
̅ = a + bt𝑥
𝑌
= 14.46 + 0.93 (t𝑥 )

12 | P a g e
Table 1.2 Trend Line Formula

Month (This Year) Time Period Sales (Y) 𝒕𝟐 𝑡Y


(t)

January 1 10 1 10
February 2 11 4 22
March 3 13 9 39
April 4 15 16 60
May 5 13 25 65
June 6 16 36 96
July 7 20 49 140
August 8 21 64 168
September 9 18 81 162
October 10 22 100 220
November 11 30 121 330
December 12 35 144 420
Total 87 224 650 1732
Average Values Coefficients
Periods (n) 12 12 a 14.46
Average 6.5 87.17 b 0.93

Step 3: Determine the monthly sales forecast (𝑌) for the next year.

January = 14.46 + 0.93(13) = 26.55

February = 14.46 + 0.93(14) = 27.48

March = 14.46 + 0.93(15) = 28.41

April = 14.46 + 0.93(16) = 29.34

May = 14.46 + 0.93(17) = 30.27

13 | P a g e
June = 14.46 + 0.93(18) = 31.20

July = 14.46 + 0.93(19) = 32.13

August = 14.46 + 0.93(20) = 33.06

September = 14.46 + 0.93(21) = 33.99

October = 14.46 + 0.93(22) = 34.92

November = 14.46 + 0.93(23) = 35.85

December = 14.46 + 0.93(24) = 36.78

Table 1.3 Next Year Forecast

Month Time Period Forecast


(This Year) (t) ( 𝒀)

January 13 26.55

February 14 27.48

March 15 28.41

April 16 29.34

May 17 30.27

June 18 31.20

July 19 32.13

August 20 33.06

September 21 33.99

October 22 34.92

November 23 35.85

December 24 36.78

14 | P a g e
SWOT ANALYSIS:

 Strength
Every Company has its own strength that they enhance more for the good of their
company’s existence. In this company, due to large investments of the investors, also the
high customer demand to the products of AMRL Corporation, the sales were able to
achieve a high profit every month. In the first month, the sales starts from 10,000, as the
month passes, it continued to increase more and more until December. The Company
should maintain this range of profit in the following years or exceed more so that they
may continue and be profitable.

 Weaknesses
All of the companies or businesses have weaknesses that they want to minimize or
eliminate if possible in their company to have or to maintain profit. In this company,
which is AMRL Corporation, the weaknesses they should do action is about the
consistency of their sales every month. Every company wants to incur profit and not
losses. Due to this, the company should think a way that may remain their sales in a high
profit.

 Opportunities
On the side of AMRL Corporation, the company should grab the opportunity in
selling their products in different places because their products are different and very
unique from others. And because of that, the demand for their product is high. The
Company should not miss this opportunity to be known by everyone. They should start
selling from provinces and as it continues to grow, they may also sell their products
outside the country.

15 | P a g e
 Threats
Companies struggle on how to maintain their status in the future and this one is one of
the threats that every company are facing. For AMRL Corporation, they should think
about their future threats on how to maintain their uniqueness from others. We all know
that as the product becomes popular, many businesses will do the same product or imitate
the product to earn profit. And because of that, the company should be prepared if that
will happen. They should create strategies or formulate another twist to their previous
product so it will remain in demand to the consumers.

16 | P a g e
Chapter V
Summary, Conclusions and Recommendations

Summary:

The AMRL Corporation has increasing trend sales during the course of twelve-month
period. The sales for the current year were given to the researchers. Using the trend line
regression analysis, the researchers were able to acquire forecasts sales for the entire succeeding
year. The researchers were also able to plot the increasing trend, showing improvement on
customer sales.

Conclusion:

Given the sales of the current year, the trend line analysis was used to forecast the
succeeding year’s sales. The researchers were able to formulate the trend line equation14.46 +
0.93 (t 𝑥 ). The forecasts viewed an expected increase in sales for the next year. This will result in
increase in investment for the next year, with a consecutive increase in customer product
demand.

Recommendations:

The researchers have fully reached the aims and objectives of the study, and created the
following recommendations for the future study:

1. The use of different methods of acquiring forecasts for the succeeding year, aside from
the trend line regression.
2. The use of other data such as customer demand, production count, and inventory storages
to forecast the sales of the next year.
3. The use of both Qualitative and Quantitative methods.

17 | P a g e