Yorkville University Decision Analysis and Forecasting Worksheet Instructions INSTRUCTIONS: Solve all the questions using MS WORD. No handwritten or pdf

Yorkville University Decision Analysis and Forecasting Worksheet Instructions

INSTRUCTIONS:

Solve all the questions using MS WORD. No handwritten or pdf acceptable
Make use to use Math Equation Editor where applicable
Submit completed assignment through Moodle. No email submissions allowed
Make sure to submit on time.

These problems focus on finding solutions to numerical problems. With that in mind, most problem sets will include a number of problems. For each problem, you will need to provide more than a simple numerical response. Your solutions should thoroughly address the issue and present your findings in a meaningful format, similar to those developed within the chapters and as part of the review exercises solutions. Any Excel spreadsheet models developed to solve the problems should be included with your submission. Part value may be assigned for incorrect responses.

Evaluation Sheet for Professor Use Only

PART 150 Marks

Question 1

TOTAL

Marks

10

Your Score

Question 2

Marks

10

Your Score

Question 3

a

b

c

d

Marks

5

5

5

5

Your Score

Question 4

a

b

Marks

5

5

Your Score

PART 248 Marks

Question 1

a

b

c

d

Marks

3

3

3

3

Your Score

Question 2

a

b

c

d

Marks

3

3

3

3

Your Score

Question 3

a

b

c

Marks

4

4

4

Your Score

Question 4

a

b

c

d

Marks

3

3

3

3

Your Score

Total

Unit #1: Marks to be recorded in grade bookè

Unit #2: Marks to be recorded in grade bookè PART 1- FOR UNIT 1
Total Value: 50 points
Instructions
These problems focus on finding solutions to numerical problems. With that in mind, most
problem sets will include a number of problems. For each problem, you will need to provide
more than a simple numerical response. Your solutions should thoroughly address the issue and
present your findings in a meaningful format, similar to those developed within the chapters and
as part of the review exercises solutions. Any Excel spreadsheet models developed to solve the
problems should be included with your submission. Part value may be assigned for incorrect
responses.
Question 1 –
10 Marks
A firm recently built a new plant that will use more than 50 production lines and machines to
produce over 500 different products. The production scheduling decisions are critical because
sales will be lost if customer demand is not met on time. If no individual in the firm has had
experience with this production operation, and if new production schedules must be generated
each week, why should the firm consider a quantitative approach to the production scheduling
problem?
Question 2 –
10 Marks
Suppose a manager must choose between the following two mathematical models of a given
situation:
•
a relatively simple model that is a reasonable approximation of the real situation and
•
a thorough and complex model that is the most accurate mathematical representation of
the real situation possible.
Why might the model described in part (a) be preferred by the manager?
Question 3 –
16 Marks
Eastman Publishing Company is considering publishing a paperback textbook on spread- sheet
applications for business. The fixed cost of manuscript preparation, textbook design, and production setup
is estimated to be $160,000. Variable production and material costs are estimated to be $6 per book.
Demand over the life of the book is estimated to be 4000 copies. The publisher plans to sell the text to
college and university bookstores for $46 each.
a. What is the breakeven point?
b. What profit or loss can be anticipated with a demand of 3800 copies?
c. With a demand of 3800 copies, what is the minimum price per copy that the publisher must
charge to break even?
d. If the publisher believes that the price per copy could be increased to $50.95 and not affect the
anticipated demand of 4000 copies, what action would you recommend? What profit or loss can
be anticipated?
Question 4 –
14 Marks
Preliminary plans are underway for construction of a new stadium for a major league baseball
team. City officials question the number and profitability of the luxury corporate boxes planned
for the upper deck of the stadium. Corporations and selected individuals may purchase a box for
$300,000. The fixed construction cost for the upper-deck area is estimated to be $4,500,000, with
a variable cost of $150,000 for each box constructed.
a. What is the breakeven point for the number of luxury boxes in the new stadium?
b. Preliminary drawings for the stadium show that space is available for the construction of
up to 50 luxury boxes. Promoters indicate that buyers are available and that all 50 could
be sold if constructed. What is your recommendation concerning the construction of
luxury boxes? What profit is anticipated?
PART 2 – FOR UNIT 2
Total Value: 48 points
Question 1. Consider the following time series data.
Week
1
2
3
4
5
6
Value
118
113
116
111
117
114
a. Construct a time series plot. What type of pattern exists in the data?
b. Develop a three-week moving average for this time series. Compute MSE and a forecast for
week 7.
c. Use a ? =0.2 to compute the exponential smoothing values for the time series. Compute
MSE and a forecast for week 7.
d. Compare the three-week moving average forecast with the exponential smoothing forecast
using ? =0.2. Which appears to provide the better forecast based on MSE? explain.
Question 2
The Cleveland Patient Transfer Company is considering the purchase of a new ambulance. The
decision will rest partly on the anticipated distance to be driven next year. The kilometres driven
during the past five years are as follows:
Year
Distance (Km)
1
3000
2
4000
3
3400
4
3800
5
3700
a. Forecast the number of kilometres for next year using a two-year moving average.
b. Find the MAD based on the two-year moving average forecast in part (a).
(Hint: You will have only three years of matched data.)
c. Use a weighted two-year moving average with weights of 0.4 and 0.6 to forecast next
year’s mileage. (The weight of 0.6 is for the most recent year.)
d. What MAD results from using this approach to forecasting? (Hint: You will have only
three years of matched data.)
Question 3
The actual demand for the patients at Lobeto Medical Clinic for the first six weeks of this year
follows:
Week
Actual Number of Patients
1
65
2
62
3
70
4
48
5
63
6
52
Clinic administrator Nzeiza Mbeto wants you to forecast patient demand at the clinic for week 7
by using this data. You decide to use a weighted moving average method to find this forecast.
Your method uses four actual demand levels, with weights of 0.333 on the present period, 0.25
one period ago, 0.25 two periods ago, and 0.167 three periods ago.
a. What is the value of your forecast?
b. If instead the weights were 20, 15, 15, and 10, respectively, how would the forecast
change? Explain why.
c. What if the weights were 0.40, 0.30, 0.20, and 0.10, respectively? Now what is the
forecast for week 7?
Question 4.
HP computers uses the CR5 chip in some of its laptop computers. The prices for the chip during
the past 12 months were as follows:
Month
Price per chip
Month
Price per chip
January
$1.80
July
$1.80
February
$1.67
August
$1.83
March
$1.70
September
$1.70
April
$1.85
October
$1.65
May
$1.90
November
$1.70
June
$1.87
December
$1.75
a. Use a two-month moving average on all the data and plot the averages and the prices.
b. Use a three-month moving average and add the three-month plot to the graph created in part
(a).
c. Which is better (using the mean absolute deviation): the two-month average or the threemonth average?
d. Compute the forecasts for each month using exponential smoothing, with an initial forecast
for January of $1.80. Use a ? = 0.1, then a ? = 0.3, and finally a ? = 0.5. Using MAD, which
? is the best?

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