Study the scenario provided below and answer all questions that follow. InSight Limited imports reading glasses from

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Question:

Study the scenario provided below and answer all questions that follow.

InSight Limited imports reading glasses from China for sale in a Southern African country. During the 2021 financial year, the company adhered to the policy of importing 6 000 pairs of reading glasses every month. The actual monthly sales of reading glasses by InSight Limited during the 2021 financial year is depicted in Table 2.1 below. The company paid R5 000 to place an order for the reading glasses and a carrying cost of R2.00 for each pair of reading glasses during 2021. January 2021

Table 2.1: Actual sales data for the reading glasses during 2021

Month

January 2021 February 2021 March 2021 April 2021

May 2021

June 2021

July 2021 August 2021 September 2021 October 2021 November 2021 December 2021

Actual Sales (Pairs of reading glasses)

2 800

3 000

5 000

4 000

5 600

8 000

7 900

6 000

4 050

4 900

5 550

3.1 Using the actual sales data provided above, determine the economic order quantity (EOQ) of reading

glasses for 2021 financial year. (6 marks)

3.2 Using the EOQ model, determine the number of orders for reading glasses placed by InSight Limited during 2021. (3 marks)

3.3 Suppose that the reading glasses arrive at the premises of Insight Limited 7 days after an order has been placed, determine the level at which Insight Limited had to replenish the stock during 2021 (Assume a 350 working days during 2021). (4 marks)

3.4 Determine how much Insight Limited would save by switching from the current ordering policy to the economic order quantity model. (7 marks)

QUESTION 4 (20 marks)

Using the sales data of the reading glasses in Table 2.1 (question 3), answer the following questions:

4.1 Calculate the three-month-weighted-moving-average monthly forecasts for the period April 2021 – December 2021. Use weights of 0.5, and 0.2 for the most recent and oldest monthly data respectively and 0.3 for the middle month (show all workings).

4.2 Determine the Mean Absolute Deviation (MAD) of the three-month-weighted-moving- average monthly forecasts for the April - December 2021 period. (4 marks)

a. The linear regression equation of the sales of reading glasses for the 2021 financial year is given by the expression: y = 201.4x + 4091 (where 'y' denotes monthly sales, and 'x', the number representing the month. For example, x = 1, 2, 3, etc., if the month is January, February, March, etc.). Use the regression equation to determine the Mean Absolute Deviation (MAD) of the regression forecasts for the April - December 2021 period.

b. Which of the two methods is better at forecasting the sales of the reading classes? Explain.