**Activity 3.5 – Module Problems and Case Study**

Complete the following case study and problems and submit the results in either a Microsoft Word document or a Microsoft Excel spreadsheet. If you choose to use an Excel spreadsheet, place each problem on a separate sheet and label the tab with problem number. Save your document with a descriptive file name, including the assignment and your name. |

**Chapter 4:**

· North-South Airline Case Study: *In January 2008, Northern Airlines merged with Southeast Airlines* . . .

3-1 Data collected on the yearly demand for 50-pound bags of fertilizer at Wallace Garden Supply are shown in the following table.

Year Demand for fertilizer

(1,000s of bags)

1 4

2 6

3 4

4 5

5 10

6 9

7 10

8 11

9 15

10 16

11 18

a. Develop a 3-year moving average to forecast sales.

b. Then estimate demand again with a weighted moving average in which sales in the most recent year are given a weight of 3 and a weight of 2 for the second past year and sales in the other 2 years are each given a weight of 1.

c. Which method do you think is best?

d. Develop a trend line for the demand for fertilizer using any computer software.

e. You have now developed three different forecasts. These are a3-year moving average, a weighted moving average, and a trend line. Which one would you use? Explain your answer.

3-2 Sales of Cool-Man air conditioners have grown steadily during the past 5 years:

Year Sales

1 440

2 465

3 520

4 573

5 586

6 ?

The sales manager had predicted, before the business started, that year 1’s sales would be 410 air conditioners.

a. Using exponential smoothing with a weights of a = 0.30, 0.60, and 0.90 develop forecasts for years 2 through 6.

b. What effect did the smoothing constant have on the forecasts for Cool-Man air conditioners?

c. Which smoothing constant gives the most accurate forecast?

d. Use a three-year moving average forecasting model to forecast the sales of Cool-Man air conditioners.

e. Use the trend projection method to develop a forecast for the sales of Cool-Man air conditioners.

f. Which of the five models you developed was the most accurate (best)?

3-3 A major source of revenue in Texas is a state sales tax on certain types of goods and services. Data are compiled and the state comptroller uses them to project future revenues for the state budget. One particular category of goods is classified as Retail Trade. Four years of quarterly data (in $millions) for one particular area of southeast Texas follow:

Quarter Year 1 Year 2 Year 3 Year 4

1 218 225 234 250

2 244 254 265 283

3 243 255 264 289

4 298 301 334 362

a. Compute seasonal indices for each quarter based on a CMA.

b. Deseasonalize the data and develop a trend line on the deseasonalized data.

c. Use the trend line to forecast the sales for each quarter of year 5.

d. Use the seasonal indices to adjust the forecasts found in part (c) to obtain the final forecasts.

You may submit just the answers or you may submit the answers and the QM worksheets you used to arrive at the answer. Choosing the latter will afford instructors the opportunity to review your work and determine if you understand the concept but have made some minor computational error, therefore allowing them to assign some credit based on your understanding. Submitting just the answers does not provide for any partial credit.

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Subject | Mathematics |

Due By (Pacific Time) | 10/09/2015 12:00 am |

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