Question

In the following, you can see the seasonal component of the monthly beer sales data based on multiplicative decomposition. Describe the results of the decomposition. Please be specific in explaining the meaning of the seasonal coefficients for each month.

Jan Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec

1975. 0.88. 0.87. 1.03. 1.04. 1.13. 1.14. 1.14. 1.13. 0.98. 0.95. 0.86. 0.84

1976. 0.88. 0.87. 1.03. 1.04. 1.13. 1.14. 1.14. 1.13. 0.98. 0.95. 0.86. 0.84

1977. 0.88. 0.87. 1.03. 1.04. 1.13. 1.14. 1.14. 1.13. 0.98. 0.95. 0.86. 0.84

Answer 1

If the total beer sales in one year is x then the seasonal coefficients imply that the sales for a specific month would be 1/12 of the annual value multiplied by the seasonal coefficient. Hence, in this example, it will be:

0.88x / 12 in Jan

0.87x / 12 in Feb

...

0.86x / 12 in Nov

0.84x / 12 in Dec

Such that the total of 12 months sales will be x.

Seasonal coefficient is important to properly plan for production / inventory as the sales each month are not equal.