Question

Festive Floral is gearing up for online carnation sales this Mother’s Day. They
specialize in selling organic extra-large red and pink carnations. The price is $0.7 per stem,
which includes free one-day shipping to the customer.
Festive Floral pre-orders carnations directly from a certified organic farm at the cost of $0.15
per stem. The order is made prior to the growing season and flowers are grown accordingly,
so the pre-order quantity cannot be changed. However, if Festive Floral runs out of pre-ordered
carnations, they can always pick up more immediately from a local wholesaler that carries
carnations of the same quality, at the price of $0.5 per stem.
Historical demand for the past 10 years are given below, and also in the attached spreadsheet.

Year	Red	Pink
2008	5043	3010
2009	4136	1988
2010	3110	3430
2011	3584	2988
2012	4051	3436
2013	2955	4867
2014	1864	3111
2015	2646	3735
2016	3178	4290
2017	2312	827

For all questions below, please round your answers to two decimal points. Show your work by
explaining the steps of your calculation. If you choose to use Excel, you do not need to submit
the Excel file, but you may include snapshots to supplement your explanations.
(a) (3 points) Using exponential smoothing what is your best forecast for red carnations in
2018? What is the MAD of your forecast?
(b) (3 points) Based on the forecast above, what is the optimal number of red carnations to preorder
from the farm?
(c) (6 points) Repeat Parts (a) and (b) for pink carnations

The carnations are sold in dozens, and each dozen comes with a designer gift tag that says
“Happy Mother’s Day 2018 from Festive Floral!” The gift tags are identical for carnations of
both colors.
(d) (4 points) Using exponential smoothing what is your best forecast for gift tags? What is the
MAD of your forecast?
(e) (4 points) Using the same z-value as for carnations, what is the optimal number of gift tags
to prepare?
(f) (10 points) Comparing the total number of dozens of carnations ordered and the total
number of gift tags, do you notice anything strange? Can you explain?

Answer 1

ans 1.

Ans 2. Optimal number to order = 3772

Ans 3. Optimal to order = 3095

Ans 4. Ans e. Optimal tags = 573

Ans f.

tags predicted	573
total stems predicted	6444
red prediction	3722
pink prediction	3095
therefore total prediction	6817

The tag prediction is lower than the original stem prediction. This may be because the tag considers a dozen irrespective of the color