Sphere Foods Company produces a candy called "Little Stars," a bag of dozen, individually wrapped, star-shaped candies made primarily from a blend chocolate, macadamia nuts, and a blend of heavy cream fillings. the candy is shipped in cases with 160 bags of the candy per case. It has collected demand data (i.e., cases sold) from stores it supplies for the past four years, as shown in the accompanying table.  

Year     Demand (cases) 

1              2706

2              2968 

3              3180 

4              3350

Each case of candy weighs 120 lbs. Each candy is made with 40% chocolates, 30% nuts and 30% heavy cream. 

The company orders chocolate, nuts, and filling from its preferred suppliers by the pound. 

The ordering cost for chocolates is $5700 and the carrying cost is $0.45 per pound per year. The ordering cost for macadamia nuts is $6300, and the annual carrying cost is $0.63 per pound per year. The ordering cost for filling is $4500, and the annual average carrying cost is $0.55 per pound per year. (1 pound = 16 ounces).
Each of the suppliers offers the candy manufacturer a quantity-discount schedule for the ingredients as follows:

                                                                                                                                                                                                              

Chocolate                                                   Macadamia Nuts                                              Filling

                                                                                                                                                                                                              

Cost       Quantity (lbs.)                       Cost    Quantity(lbs.)                                 Cost          Quantity(lbs.) 

$3.05          0-49,999                           $6.50          0-29,999                                    $1.50             0-39,999

2.9          50,000-99,999                       6.25       30,000-69,999                                1.35          40,000-79,999

2.75           100,000+                            5.95           70,000+                                      1.25               80,000+

                                                                                                                                                                                                             

a) Forecast demand for year 5 using the linear regression method.
b) Calculate the total annual requirements for each ingredient from the annual demand forecast. 

c)  Determine the inventory order quantity for each of the three ingredients ordered from its suppliers. 

d) Calculate the total inventory cost (including purchase cost) for the year to meet the annual demand. 

Answer rating: 100% (QA)

To address each part of your question step by step lets go through the calculations and the concepts involved a Forecast demand for year 5 using the linear regression method Linear regression is a met... View the full answer