Take Test: Problem Set 2 - Capacity and Demand Planning Test Information Description Instructions Multiple Not allowed. This test can only be Attempts taken once. Force This test can be saved and resumed Completion later. Question Completion Status: Save and Submit QUESTION 1 1. Sweetwater Bakery has been using a forecast model for two years to predict quarterly sales and now decide to test it using MAD and a tracking signal. Moreover, they want your help in developing a new forecasting model that takes into account the seasonality in sales and any detectable trend. You believe there is a seasonal factor associated with quarterly sales. Here is quarterly data from the past two years. Period Forecast Actual Period Forecast Actual Sales Sales Quarter 1 250 300 Quarter 5 400 416 Quarter 2 500 540 Quarter 6 800 760 Quarter 3 950 885 Quarter 7 1100 1191 Quarter 4 650 580 Quarter 8 800 760 2. 3. 4. Questions: a) Find the tracking signal. Is the current forecasting routine acceptable? 5. b) Prepare a forecast for the upcoming year using decomposition. 6. 7. 1. Please show calculations wherever required. Attach File 60 points QUESTION 2 1. Timey electronics is a producer of digital watches. The company is considering expansion into one of two other product markets: (i) smart watches or (ii) digital music players. They have completed some preliminary market tests to confirm that a market exists for both products. If the smart watches are successfully developed, the company projects revenues of $1,000,000 over the next five years. If the digital music players are successfully developed, the company projects revenues of $400,000 over the next five years. The smart watch is a breakthrough product, which will require significant research and development (R&D) investments. There is only a 5% chance that the development of the smart watch will be successful. The company estimates that product development for the smart watch will be $100, 000. The digital music players will only cost $10,000 of research and development (R&D) investments. There is an 80% chance that the development of the digital music player will be successful. For both products, if the NPD process is not successful, then Timey will not realize any revenues. If the product development of either of these products is successful, then Timey will discontinue sales of the digital watches and reallocate the current production capacity from the production of digital watches to the production of the new product. Alternatively, if Timey decides not to produce either the smart watches or the digital music players, then it will continue to produce its digital watches at the currently output volume. If they continue selling its digital watches, the company projects revenues of $225,000 over the next five years. Questions: What will Timey decide to do, if (a) they use an Expected Value decision criteria (b) they use a Maximax criteria (c) they use a Maximin criteria? Please show all calculations wherever required