BADB3013 - Production and Operations Management:

DemandForecasting

1. A smallhospitalisplanningforfutureneedsinitsmaternitywing.Thedatabelowshowthenumberofbirthsineach ofthepasteightyears.

Year	Births	Year	Births
1	565	5	615
2	590	6	611
3	583	7	610
4	597	8	623

a. Usesimple linear regressiontoforecast theannualnumberofbirths foreach ofthenextthreeyears.

b.Determinethecorrelationcoefficientforthedataandinterpretitsmeaning.

c. Findthecoefficientofdeterminationforthedataand interpretitsmeaning.

2. SuregripCalculatorCompany(SCC)needstoestimateitssalesfornextyear. Themostrecent sixyearsofrevenuedataforthecompany'spopular lineofcalculatorsaregivenbelow:

Year	SalesRevenues	Year	SalesRevenues
(millionsofdollars)	(millionsofdollars)
1	46.7	4	77.9
2	59.3	5	85.1
3	74.2	6	98.0

a. Assumingthatthesalesdataabovearerepresentativeofsalesexpected nextyear,usetimeseriesregression analysistoforecastnextyear's(Year7's)salesrevenues.

b.Determinethecorrelationcoefficientforthedataandinterpret itsmeaning.

c.Findthecoefficientofdeterminationforthedataandinterpret itsmeaning.

3. FinleyHeatersInc.isamid sizedmanufacturerofresidentialwaterheaters.Sales havegrownduring thelastseveral years, and the company's production capacity needs to be increased. The company's management wonders ifnationalhousing startsmightbea goodindicatorofthecompany's sales: (CLO3:10Marks)

Year	National	FinleyHeaters'
HousingStarts	AnnualSales
(millions)	(millionsofdollars)
I	6.2	57
2	5.1	59
3	6.5	65
4	7.9	78
5	6.3	72
6	7.4	80
7	7.0	86

a. Developa simplelinearregressionanalysisbetween FinleyHeaters' salesandnationalhousing starts.ForecastFinley Heaters'salesforthenexttwoyears.TheNational HomeBuildersAssociationestimatesthatnationalhousingstarts willbe7.1millionand8.0million forthe nexttwoyears.

b. WhatpercentageofvariationinFinleyHeaters' salesisexplained bynationalhousing starts?

c. Would you recommend that Finley Heaters management use the forecast from Part a to plan facility expansion?Whyorwhynot?Whatcouldbedonetoimprove theforecast?