Question

Demand for stereo headphones and music players for joggers has caused Nina Industries to grow almost 50 percent over the past year. The number of joggers continues to expand, so Nina expects demand for headsets to also expand, because, as yet, no safety laws have been passed to prevent joggers from wearing them. Demand for the players for this year was as follows:

MONTH	DEMAND (UNITS)
January	4,150
February	4,250
March	3,950
April	4,350
May	4,950
June	4,650
July	5,250
August	4,850
September	5,350
October	5,650
November	6,250
December	5,950

a. Using linear regression analysis, what would you estimate demand to be for each month next year? Using a spreadsheet, follow the general format in Exhibit 3.8. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. To be reasonably confident of meeting demand, Nina decides to use 3 standard errors of estimate for safety. How many additional units should be held to meet this level of confidence? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Answer 1

a.

In the regression dialog select the demand values as Y range and period values as X range and click OK.

We get the regression output with coefficients of week and intercept .

The trend equation is ,

Forecast =Intercept+Coefficient of period*period

=3716.67+192.31*period

put period =13,......24 ,to get forecasts for next year.

Forecast for January of next year=3716.67+192.31*13=6216.67 and so on.

b.

We have,

Standard error of the forecast=sqrt(MSE)

MSE=Mean Squared error =Average of [(Actual-Forecast)^2 ] values

=AVERAGE(E2:E13)

=60683.76

Standard error of forecast=SQRT(H7)=246.34

Number of additional units to held=3*246.34=739.02

Calculations are as shown below :