Case 5: Forecasting

Branded Products, Inc., based in Oakland, California, is a leading producer and marketer of household
laundry detergent and bleach products. About a year ago, Branded Products rolled out its new Super
Detergent in four western states, following success in more limited test markets. This isn’t just a “me too”
product in a commodity market. Branded Products’ detergent contains Branded 2 bleach, a successful
laundry product in its own right. At the time of the introduction, management wondered whether the
company could successfully crack this market, dominated as it is by Procter & Gamble and other big players.

The following spreadsheet (or table) shows weekly demand data and regression model forecast
results for Super Detergent over the past seven months (30 weeks):

Weekly Sales Demand in Price per Competitor Forecast

Advertising, Ad Income, Y Month, T
Period cases, Q case, P Price, Px Demand, Q

1 1,290 $ 137 $ 94 $ 814 $ 42,498 1 1,287

2 1,177 147 81 896 41,399 2 1,187
3 1,155 149 89 852 39,905 3 1,188
4 1,299 117 92 854 34,871 4 1,311
5 1,166 135 86 810 34,239 5 1,175
6 1,186 143 79 768 44,452 6 1,200
7 1,293 113 91 978 30,367 7 1,317
8 1,322 111 82 821 37,757 8 1,321
9 1,338 109 81 843 40,130 9 1,359
10 1,160 129 82 849 31,264 10 1,172
11 1,293 124 91 797 34,610 11 1,262
12 1,413 117 76 988 41,033 12 1,349
13 1,299 106 90 914 30,674 13 1,341
14 1,238 135 88 913 31,578 14 1,196
15 1,467 117 99 867 41,201 15 1,430
16 1,089 147 76 785 30,247 16 1,032
17 1,203 124 83 817 33,177 17 1,222
18 1,474 103 98 846 37,330 18 1,453
19 1,235 140 78 768 44,671 19 1,230
20 1,367 115 83 856 37,950 20 1,333
21 1,310 119 76 771 43,478 21 1,316
22 1,331 138 100 947 36,053 22 1,306
23 1,293 122 90 831 35,333 23 1,300
24 1,437 105 86 905 44,304 24 1,484
25 1,165 145 96 996 30,925 25 1,214
26 1,328 138 97 929 36,867 26 1,300
27 1,515 116 97 1,000 41,799 27 1,485
28 1,223 148 84 951 40,684 28 1,238
29 1,293 134 88 848 43,637 29 1,331
30 1,215 127 87 891 30,468 30 1,235
Averages 1,285.8 127.0 87.3 870.2 37,430.0 15.5 1,285.8
Regression Output:

Constant 850.04

Std. Err. Of Y Est. 33.64

R-squared 91.47%
No. of Observations 30
Degrees of Freedom 24

P Px Ad Y T
X Coefficient (s) -5.033 4.744 0.277 0.011 1.309
Std. Err. Of Coef. 0.439 0.970 0.105 0.001 0.753
t-statistic -11.455 4.892 2.652 11.000 1.738

A. Interpret the coefficient estimate for each respective independent variable.

B. Characterize the overall explanatory power of this multiple regression model in light of R-squared and
the following plot of forecast and actual demand per week.