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Case - Forecasting Lost Sales

The Carlson Department Store suffered damage from a hurricane and was closed for four months while undergoing repairs. To determine compensation for lost sales during this period, the report analyzes past sales data to estimate (1) Carlson's sales if there was no hurricane, and (2) whether excess post-storm sales could offset any lost amounts.

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SHIVAM VARSHNEY
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88 views

Case - Forecasting Lost Sales

The Carlson Department Store suffered damage from a hurricane and was closed for four months while undergoing repairs. To determine compensation for lost sales during this period, the report analyzes past sales data to estimate (1) Carlson's sales if there was no hurricane, and (2) whether excess post-storm sales could offset any lost amounts.

Uploaded by

SHIVAM VARSHNEY
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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FORECASTING LOST SALES

The Carlson Department Store suffered heavy damage when a hurricane struck on August 31.
The store was closed for four months (September through December), and Carlson is now
involved in a dispute with its insurance company about the amount of lost sales during the
time the store was closed. Two key issues must be resolved:
(1) the amount of sales Carlson would have made if the hurricane had not struck, and
(2) whether Carlson is entitled to any compensation for excess sales due to increased business
activity after the storm.
More than $8 billion in federal disaster relief and insurance money came into the county,
resulting in increased sales at department stores and numerous other businesses. Table 15.19
gives Carlson’s sales data for the 48 months preceding the storm. Table 15.20 reports total
sales for the 48 months preceding the storm for all department stores in the county, as well as
the total sales in the county for the four months the Carlson Department Store was closed.
Carlson’s managers asked you to analyze these data and develop estimates of the lost sales at
the Carlson Department Store for the months of September through December. They also
asked you to determine whether a case can be made for excess storm-related sales during the
same period. If such a case can be made, Carlson is entitled to compensation for excess sales
it would have earned in addition to ordinary sales.

Sales
Month Year ($1000s)
September 1 1.71
October 1 1.90
November 1 2.74
December 1 4.20
January 2 1.45
February 2 1.80
March 2 2.03
April 2 1.99
May 2 2.32
June 2 2.20
July 2 2.13
August 2 2.43
September 2 1.90
October 2 2.13
November 2 2.56
December 2 4.16
January 3 2.31
February 3 1.89
March 3 2.02
April 3 2.23
May 3 2.39
June 3 2.14
July 3 2.27
August 3 2.21
September 3 1.89
October 3 2.29
November 3 2.83
December 3 4.04
January 4 2.31
February 4 1.99
March 4 2.42
April 4 2.45
May 4 2.57
June 4 2.42
July 4 2.40
August 4 2.50
September 4 2.09
October 4 2.54
November 4 2.97
December 4 4.35
January 5 2.56
February 5 2.28
March 5 2.69
April 5 2.48
May 5 2.73
June 5 2.37
July 5 2.31
August 5 2.23

Sales
Month Year ($Millions)
September 1 55.80
October 1 56.40
November 1 71.40
December 1 117.60
January 2 46.80
February 2 48.00
March 2 60.00
April 2 57.60
May 2 61.80
June 2 58.20
July 2 56.40
August 2 63.00
September 2 57.60
October 2 53.40
November 2 71.40
December 2 114.00
January 3 46.80
February 3 48.60
March 3 59.40
April 3 58.20
May 3 60.60
June 3 55.20
July 3 51.00
August 3 58.80
September 3 49.80
October 3 54.60
November 3 65.40
December 3 102.00
January 4 43.80
February 4 45.60
March 4 57.60
April 4 53.40
May 4 56.40
June 4 52.80
July 4 54.00
August 4 60.60
September 4 47.40
October 4 54.60
November 4 67.80
December 4 100.20
January 5 48.00
February 5 51.60
March 5 57.60
April 5 58.20
May 5 60.00
June 5 57.00
July 5 57.60
August 5 61.80
September 5 69.00
October 5 75.00
November 5 85.20
December 5 121.80

Managerial Report
Prepare a report for the managers of the Carlson Department Store that summarizes your
findings, forecasts, and recommendations. Include the following:
1. An estimate of sales for Carlson Department Store had there been no hurricane
2. An estimate of countywide department store sales had there been no hurricane
3. An estimate of lost sales for the Carlson Department Store for September through
December

In addition, use the countywide actual department stores sales for September through
December and the estimate in part (2) to make a case for or against excess storm-related
sales.

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