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Business Statistics Problems

1. Using exponential smoothing and smoothing constants of .20 and .40 calculate forecasts for periods 2 to 5. Calculate the MAD to determine which smoothing constant is more accurate.
Which smoothing constant would you select?

Demand Forecast
1 100
2 112
3 113
4 120
5 110

2. Monthly water usage for a business as measured in 100s of cubic feet are as follows:
Quantity (in 100's cubic feet)
January 17
February 24
March 21
April 20
May 17
June 21
July 21
August 19
September 17
October 18
November 20
December 21
Using regression what is the forecast for next March?

3. An item costing $10 is ordered in quantities of 500 units, weekly demand is 100 units, carrying costs are 20%, the company is open 52 weeks a year, and the cost of placing an order is $50.

What is the average inventory?
What is the number of orders placed per year?
What is the annual inventory holding cost?
What is the annual ordering cost?

4. The table below shows two years of sales information by quarters. Use decomposition to determine the quarterly sales numbers for year three.

Year 1 Year 2

Quarter 1 155 220
Quarter 2 195 240
Quarter 3 150 205
Quarter 4 140 190

5. A company purchases a part costing $8. Annual demand is 400,000, ordering costs are $32, inventory carrying costs are 20%. What quantity should the company order?

If the supplier offers a 3% discount on orders 5,000 and over should you take them up on this offer and why?

Solution Summary

This solution is comprised of detailed explanation and step-by-step calculation of the given problems and provides students with a clear perspective of the underlying concepts.