LOM 252 -ASSIGNMENT QUANTITATIVE METHODS

Problem 1 (6 marks)

Raysut Cement Company has divided Oman into different areas. The following table shows the Population and actual Sales for the current areas in which the company does business. The table also gives the Forecast values that were calculated for each of the areas:

Areas Population Sales Forecast

(thousands) (millions) (millions)

A 2.53 410 413

B 1.76 240 232

C 6.81 595 590

D 4.22 325 339

E 12.77 990 925

F 5.09 665 662

G 10.82 840 859

H 16.84 1,450 1329

I 7.65 825 853

J 11.34 935 933

K 6.18 830 844

1. Calculate the regression equation.
2. Calculate the correlation coefficient and interpret it.
3. The company is planning to expand into two additional areas in the coming year. The population of these two areas are 743,000 and 387,000. What are the estimated sales that can be expected from these two areas?
4. Compute the MAD value to arrive at the forecast accuracy.

Problem 2 (4 marks)

Talib must decide whether to have one or two machines for tailoring. One machine will mean a fixed cost of $6000 a month, and the two machines will mean a fixed cost of $10,500 a month. Variable costs involved are $3 per piece, and revenue will be $5.95 per piece.

1. If the first month demand is 5000 pieces, how much will the profit be from using each of the options- (i) one machine; (ii) two machines.
2. Talib projects an average demand of between 14 to 18 pieces per hour. Each machine can process 15 pieces an hour. Would you recommend one or two machines to Talib? Justify your answer.
3. provide all the steps

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