DEMAND FORECASTING

1. The total cost of production for a product is related to the number of units produced. The data for the past 10 months is as follows: Total Production No. of units produced Cost (in 1000Rs.) (in 1000 units) 1 30 5 2 51 10 3 46 8 4 22 4 5 37 6 6 69 12 7 21 4 8 45 7 9 65 13 10 55 10 Using the regression analysis, determine the relationship between production cost and unit produced. b) c) Interpret the meaning of the coefficients in the regression line estimated in part (a). If the company is planning a production level of 11,000 units for the upcoming month, what is your forecast for the total production cost that the company will incur at this production level? d) e) Compute the standard error of estimate for the regression line. What is its interpretation in the context of this problem. What percentage of variation in the production cost is explained by the units produced. 2. The monthly demand for units manufactured by ABC Ltd. Has been as follows: Month May June July Unit 100 80 110 Month September October November Unit 105 110 125 Month

a)

August 115 December 120 a) Use exponential smoothing method to forecast the number of units for June January. The initial forecast for the May was 105 units, = 0.2, 0.5, 0.8
b)

Calculate the absolute percentage error for each month from June through December and the MAD and MAPE of forecast error as of the end of December. Calculate the tracking signal as of the end of December. What can you say about the performance of your forecasting method.

c)

3.

The demand of particular brand of soap is experiencing a decline. The company wants to monitor demand for this product closely as it nears the end of its life cycle. The trend adjusted exponential smoothing method is used with = 0.1 and = 0.2. At the end of December, the January estimate for the average number of units sold per month. It was 900,000 and the trend was 50,000 units per month. The actual sales history for January, February and March is given below. Generate forecast for February, March and April. January - 8,90,000 February- 8,00,000 March- 8,25,000

4. The Manager of a utility company wants to develop a quarterly forecast of power loads for the next year. The power loads are the seasonal and the data on the quarterly loads in megawatts (MW) for the last four years are as follows: Quarters Year 1 2 3 4 1 103 126 144 166 2 94 116 137 152 3 118 141 159 178 4 109 131 145 169

The manager has estimated the total demand for the next year at 780 MW. Use multiplicative seasonal method to develop the forecast for each quarter.