Case Problem 3 – Forecasting Food and Beverage Sales
The vintage restaurant, on Captiva Island near Fort Myers, Florida, is owned and
operated by Karen Payne. The restaurant just completed its third year of operation.
During that time, Karen sought to establish a reputation for the restaurant as a highquality dining establishment that specializes in fresh seafood. Through the efforts of
Karen and her staff, her restaurant has become one of the best and fastest-growing
restaurants on the island.
To better plan for future growth of the restaurant, Karen needs to develop a
system that will enable her to forecast food and beverage sales by month for up to one
year in advance. Table 6.17 shows the value of food and beverage sales ($1000s) for the
first three years of operation.
Managerial Report
Perform an analysis of the sales data for the vintage restaurant. Prepare a report for
Karen that summarizes your findings, forecasts, and recommendations. Include the
• A time series plot. Comment on the underlying pattern in the time series.
• Using the dummy variable approach, forecast sales for January through December
of the fourth year.
Assume that January sales for the fourth year turn out to be $295,000. What was your
forecast error? If this error is large, Karen may be puzzled about the difference between
your forecast and the actual sales value. What can you do to resolve her uncertainty in the
forecasting procedure?

Answer: Forecasting is important for a business as it help in analyzing the risks…….