Question
Case 2. Forecasting Crude Oil Imports (30 marks) Canada computer company serves many businesses in the Ottawa region. The company sells supplies and provides
Case 2. Forecasting Crude Oil Imports (30 marks) Canada computer company serves many businesses in the Ottawa region. The company sells supplies and provides customer service on all computers sold through their sales offices. Most of the items are stocked, and the management is concerned about stockout because of the growth in the business. Proper forecasting will help to estimate the requirements several months in advance so that adequate inventory can be stocked. The data on the demand (sales) for 16-GB DDR4 computer RAM over the past 50 months is provided in the attached Excel spreadsheet. a) Create a time series plot of sales data and comment on the patterns you observe. (2 marks) b) Forecast the demand for month 51 using the trend project method with linear regression. Provide the corresponding regression equation. Report the correlation coefficient for this model. Also calculate the Mean absolute deviation (MAD) error metric. Begin your error calculation from month 1. (11 marks) c) A management consultant team working with the company suggest that new office building leases can be a good predictor for company sales. They reference a study that new office building leases precede office equipment purchases and supply sales by three months. According to the study, leases in month 1 will affect equipment sales in month 4, and leases in month 2 will affect sales in month 5, and so on. Create a graph for sales data with leases as a predictor. Comment on the pattern you observe. Calculate the correction coefficient for their relationship. (4 marks) d) Adding leases as a leading predictor to your analysis, develop a forecasting model for sales, with leases as the independent variable. Provide the corresponding regression equation and forecast the sales for month 51. Also calculate the Mean absolute deviation (MAD) error metric. Begin your error calculation from month 4. (9 marks) e) Create a graph showing the forecasts from part (d) against actual values of sales. (2 marks) f) Which of the two models provides a better forecast? explain. (2 marks)
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