MBA612 - Homework Assignment - H2-B

Chapter 9Forecasting and Demand Planning

You must show all formulas, calculations, and circle correctanswers.

PROBLEMS

1. Using the data shown below, compute the mean square error, mean absolute deviation, and mean absolute percentage error for the forecasts shown.

Month Forecast Demand Actual Demand

April 170 180

May 225 200

June 210 200

July 260 240

August 200 230

MBA612 - Homework Assignment - H2-B

Chapter 9Forecasting and Demand Planning

2. Consider the sales for six consecutive weeks for Sam's Strawberries. The sales are in "flats" sold.

Week Sales

1 16

2 18

3 14

4 10

5 20

6 22

a. Using a 3-period moving average, forecast the sales for weeks 4 through 6. b. Use exponential smoothing with = .3 to forecast sales for weeks 4 through 6. c. Use linear regression (time series) to develop a prediction equation that will forecast sales.Then use that prediction equation to get forecasts for weeks 4 through 6.

d. Use MAD to pick the best forecasting method of A through C.

MBA612 - Homework Assignment - H2-B

Chapter 11Inventory Management

3.Using the data below, find the EOQ, the total annual cost associated with the economic order quantity, andthe reorder point.

Annual Demand: 8,000 units

Weeks Operating: 52/year

Ordering Cost: $35/order

Holding Cost: $4/unit/year

Lead Time: 3 weeks

ANSWER:

MBA612 - Homework Assignment - H2-B

Chapter 11Inventory Management

4. A merchant wants to stock Christmas trees. She can place only one order per season. The merchantpays $30 for each tree and sells them for $80 each. She will incur an additional cost of $6 each forunsold trees that must be hauled to the landfill. If demand for Christmas trees is normally distributedwith a mean of 365 trees and a standard deviation of 46 trees, how many trees should she order?

ANSWER:

MBA612 - Homework Assignment - H2-B

Chapter 11Inventory Management

5.The operations manager at a chemical company that produces insecticide for use in commercial applicationsis attempting to set a safety stock level for a key ingredient that is used in their most powerful product.She believes that demand during lead time for this ingredient is normally distributed based on pastdata. In addition, she believes that future use is accurately depicted by these historical demand-during lead-time data (in gallons): 55, 75, 75, 70, 80, 60, 50, 70, 60, and 85. She estimates the standarddeviation of demand during the lead time to be 8.5 gallons.

a. What is the average demand during the lead time for this key ingredient?

b. What is the safety stock the company needs to provide a 95% service level?

c. What is the order point the company should use?

ANSWER: