New Jersey Designs is a large merchandiser of apparel for budget-minded families. Management recently became concerned about the amount of inventory carrying costs and transportation costs between warehouses and retail outlets. As a starting point in further analyses, Mike Hancock, the controller, wants to test different forecasting methods and then use the best one to forecast quarterly expenses for 2012. The relevant data for the previous three years have been given below:

Simple regression results:
Intercept term (constant) = $11,854.55
Slope coefficient (variable cost rate) = $126.22
R-squared (coefficient of determination) = 0.19
t-statistic = 1.5
SE = 974
On the basis of the given data, complete the following:

Requirements
• Run the regression in Microsoft Excel and verify the results above.
• Calculate the quarterly forecasts for 2012 using the high–low method and regression analysis.
Recommend the method Mike should use and explain the reason.
• Explain how has your forecast in the above question changed when ACME Designs is involved in global sourcing of products for its stores.

Transcribed Image Text:

W &T 2010 W & T 2011 W & T 2009 Quarter Quarter Expenses $12,500 $11,300 Expenses $12,900 Quarter Expenses $13,300 $12,300 1. 2 $12,100 3 3 $11,600 $11,700 $12,100 4 4 $13,700 $14,000 $14,600