Concept of decomposing a time series

1. Explain the concept of decomposing a time series

2. Explain when a multiplicative decomposition may be more appropriate than an additive decomposition

A large resort near Portland, Maine, has been tracking its monthly sales for several years but has never analyzed these data. The resort computes the seasonal indexes for its monthly sales.Which of the following statements about the index are correct?

a. The sum of the 12 monthly index numbers, expressed as percentages, should be 1,200.

b. An index of 85 for May indicates that sales are 15% lower than the average monthly sales.

c. An index of 130 for January indicates that sales are 30% above the average monthly sales.

d. The index for any month must be between zero and 200. e. The average percent index for each of the 12 months should be 100.

Solution: