1. A. You took over the responsibility as General Manager from your father last year. The company forecasted demand of one of your companys product was 200 units in July 2019 with an increase of 10% over July month for the subsequent months up to April 2020. The Actual sales reflect a 5% lower number than the forecasted demand for each month up to December 2019 and a 10% higher number than the forecasted demand for January, February, March and April 2020. The selling price per unit of the product is fixed at RO 10. The company wants to assign a weightage of 0.3, 0.25, 0.2 and 0.1 for the months April, March, February and January respectively and for the remaining months equal weightage of 0.05 need to be assigned for the purpose of forecasting demand using weighted moving average method.

Using this information, you are required

i) Determine forecast for May and June 2020 using method of least squares ( 2 Marks)

ii) Determine forecast for May 2020 using 7 months weighted moving average method ( 2 Marks)

iii) Explain as to which method has a more accurate forecast for May 2020 (1 Mark)

B. Amjad Company faces the challenge of surviving in the market along cutthroat competition from competitors. For its survival the company aims to cut down on cost. In-depth analyses of the financial statements throw light on the inability of the company to cut down on one of its heaviest cost factors, i.e the inventory cost. For this reason the company policy makers suggest the economic order quantity method to be adopted.

The company records suggest that the company possess an annual demand of 240,000 units. Due to COVID-19, the company would now be operating at 50% capacity. The buying cost per order remains RO 150 and the carrying cost, which has declined by 3% over the past year stands at 10%. The COVID-19 effect has forced the seller to make it attractive for the buyers. The seller agrees to offer items @ 10 RO per unit and promises to further reduce the selling price by 3 RO per unit for order of 10000 units.

You are requested to advice as to how the company could cut down on its inventory cost.