Question

The Municipal Government has asked you to forecast the sales tax revenue it will collect in...

The Municipal Government has asked you to forecast the sales tax revenue it will collect in 2017, 2018 and 2019. Data on revenue in recent years is presented below.

Year

Q1

Q2

Q3

Q4

TOTAL

2012

         695

         788

         809

      1,302

$3,594

2013

         896

         941

      1,018

      1,677

$4,532

2014

      1,037

         929

      1,353

      2,090

$5,409

2015

      1,067

      1,081

      1,574

      2,143

$5,865

2016

      1,147

      1,161

      1,683

      2,372

$6,362

*In thousands

You see an upward trend in the data, and you decide to try the moving average method or regression models to develop your forecast.

a. Estimate annual sales tax revenue for 2017, 2018 and 2019 using a moving average “3-day” (MA3) model. Please clearly show the process you use to come up with your estimates. (5 points)

b. Estimate annual sales tax revenue for 2017, 2018 and 2019 using a moving average “4-day” (MA4) model. Please clearly show the process you use to come up with your estimates. (5 points)

c. Using one of the methods, forecast the quarterly sales tax revenue for 2017. Clearly show the process you use to come up with your estimates. (Hint: consider average or moving average by quarter, or ratio / percent.) (5 points)

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Answer #1
a. Estimate of annual sales tax revenue for 2017, 2018 and 2019 using
“3-day” (MA3) model
2014 5409
2015 5865
2016 6363
2017 5879 (5409+5865+6363)/3
2018 6036 (5865+6363+5879)/3
2019 6093 (6363+5879+6036)/3
b.Estimate of annual sales tax revenue for 2017, 2018 and 2019 using
“4-day” (MA4) model
2013 4532
2014 5409
2015 5865
2016 6363
2017 5542 (4532+5409+5865+6363)/4
2018 5795 (5409+5865+6363+5542)/4
2019 5891 (5865+6363+5542+5795)/4
c. Forecast the quarterly sales tax revenue for 201forecast the quarterly sales tax revenue for 2017
Moving average by Quarter Workings
2016 Q2 1161
Q3 1683
Q4 2372
2017 Q1 1739 (1161+1683+2372)/3
Q2 1931 (1683+2372+1739)/3
Q3 2014 (2372+1739+1931)/3
Q4 1895 (1739+1931+2014)/3
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