A Vintage Restaurant, on Captiva Island near Fort Myers,Florida, is owned and operated by Karen Payne. The restaurant justcompleted its third year of operation. During that time, Karensought to establish a reputation for the restaurant as ahigh-quality dining establishment that specializes in freshseafood. Through the efforts of Karen and her staff, herrestaurant has become one of the best and fastest-growingrestaurants on the island.

Karen believes that to plan for the growth of the restaurantin the future, she needs to develop a system that will enable herto forecast food and beverage sales by month for up to one year inadvance. Karen compiled the following data (in thousands ofdollars) on total food and beverage sales for the threee years ofoperation.

Month 1styear 2ndyear 3rdyear
January 242 263 282
February 235 238 255
March 232 247 265
April 178 193 205
May 184 193 210
June 140 149 160
July 145 157 166
August 152 161 174
September 110 122 126
October 130 130 148
November 152 167 173
December 206 230 235
Managerial Report

Perform an analysis of the sales data for the VintageRestaurant. Prepare a report for Karen that summarizes yourfindings, forecasts, and recommendations. Include thefollowing:

1. A graph of the time series.
2. An analysis of the seasonality of the data. Indicate theseasonal indexes for each month and comment on the high and lowseasonal sales months. Do the seasonal indexes make intuitivesense? Discuss.
3. A forecast of sales for January through December of thefourth year.
4. Recommendations as to when the system that you developshould be updated to account for new sales data.
5. Any detailed calculations of your analysis in the appendizof your report.
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 andthe actual sales value. What can you do to resolve her uncertaintyin the forecasting procedure?