Forecasting inventory with regression analysis Answer: c Diff: M

36. Over the past four years, a well-managed company has had the following link
between its inventories and its sales:

Year Sales Inventories

1999 $200 million $35 million
2000 250 million 38 million
2001 400 million 55 million
2002 500 million 70 million

The company is in the process of generating its forecasted financial

statements for 2003. The company first generates a forecast for sales and
then, given its sales forecast, uses a regression model (using data given
above) to forecast its inventories for 2003. Assuming that the forecasted
sales for 2003 are $650 million, what are its forecasted inventories for 2003?

a. $54,399,885
b. $75,801,342
c. $86,175,824
d. $93,000,000
e. $97,542,137

Forecasting inventory with regression analysis Answer: b Diff: M

37. A well-managed company has reported the following sales and inventories
over the past three years:

Year Sales Inventories

2000 $1,700,000 $150,000
2001 1,900,000 165,000
2002 2,400,000 185,000

The company forecasts that its sales will be $3,000,000 in 2003, and the
company uses regression analysis (on the basis of the last three years’
data) to forecast its inventories. What are its forecasted inventories (to
the nearest dollar) for 2003?

a. $209,000
b. $214,744
c. $215,689
d. $230,000
e. $530,667

Chapter 17 - Page 15