1 Compare the accuracy of forecasts made by incorporating operating leverage into your forecasts (i.e., by estimating a cost function and using that cost function to project costs, given sales) to those that simply extrapolate from the prior year (i.e., last years costs as a percentage of sales will be this years costs as a percentage of sales). This is very similar to what is on the dell operating leverage spreadsheet in blackboard. There needs to be a clear numerical comparison of the accuracy of the two forecasts; the basis for your conclusion needs to be clear

2 Redo part 1 after making adjustments for the cost functions that make no sense. Cost functions that make no sense are those with variable cost percentages greater than one or less than zero, or those with very high (relative to actual costs) or negative fixed cost estimates. The adjustments include estimating the cost function by going back more than one year, using the last good cost function, or defaulting to the nave method.

3 Provide a brief narrative explaining your results and conclusions.

\begin{tabular}{lrrrrrrr|r|r|r|r|r|r|} \hline & 1999 & 2000 & 2001 & 2002 & 2003 & 2004 & 20005 & 2006 & 2007 & 2008 \\ Revenue & 2,857.60 & 4,644.20 & 3,891.80 & 2,697.00 & 3,519.20 & 5,001.40 & 5,847.60 & 5,649.00 & 6,013.00 & 5,808.00 & 5,403.00 \\ COGS & 1,964.40 & 2,514.60 & 2,589.80 & 2,105.70 & 2,327.10 & 3,032.60 & 3,455.80 & 2,856.00 & 3,751.00 & 3,488.00 & 3,131.00 \\ SG\&A & 540.1 & 599 & 620 & 670.1 & 587.3 & 807 & 1,016.10 & 1,140.00 & 1,373.00 & 1,304.00 & 994.00 \\ EBIT & 353.10 & 1,530.60 & 682.00 & 78.80 & 604.80 & 1,161.80 & 1,375.70 & 1,653.00 & 889.00 & 1,016.00 & 1,278.00 \end{tabular} \begin{tabular}{lrrrrrrr|r|r|r|r|r|r|} \hline & 1999 & 2000 & 2001 & 2002 & 2003 & 2004 & 20005 & 2006 & 2007 & 2008 \\ Revenue & 2,857.60 & 4,644.20 & 3,891.80 & 2,697.00 & 3,519.20 & 5,001.40 & 5,847.60 & 5,649.00 & 6,013.00 & 5,808.00 & 5,403.00 \\ COGS & 1,964.40 & 2,514.60 & 2,589.80 & 2,105.70 & 2,327.10 & 3,032.60 & 3,455.80 & 2,856.00 & 3,751.00 & 3,488.00 & 3,131.00 \\ SG\&A & 540.1 & 599 & 620 & 670.1 & 587.3 & 807 & 1,016.10 & 1,140.00 & 1,373.00 & 1,304.00 & 994.00 \\ EBIT & 353.10 & 1,530.60 & 682.00 & 78.80 & 604.80 & 1,161.80 & 1,375.70 & 1,653.00 & 889.00 & 1,016.00 & 1,278.00 \end{tabular}