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The owner and manager of LaLa Department Store, has decided to use
statistical forecasting to get a better handle on the demand for his major
products. One category is major household appliances, such as washing
machines, which have a relatively stable sales level. Monthly sales of
washing machines last year are shown below.
a. [2 Mark] Use the moving-average method with n = 3 retrospectively
to determine what the forecasts would have been for the last 9
months of last year and error using MAD method.
b. [2 Mark] Use the Simple Exponential Smoothing to determine what
the forecasts would have been for the last year. (Let the initial
estimate of level = 25 and smoothing constant
= 0.1) and error using MAD method.
c. [1 Mark] Draw the graph plotting the actual sales, Moving Average
and the Simple Exponential Smoothing results in one plot.
Tamama Supermarket purchases milks from three different suppliers,
namely Nade, Sada and Marae. The following table shows the unit price and
the average demand of each type of milk per year. A fixed transportation
cost of SAR 100 is incurred each time an order is delivered. For each type
of milk ordered and delivered, an additional fixed product specific order cost
is incurred for receiving and storage. The product specific order cost is also
shown in the following table. (Interest rate is 15% and 1 year = 52 weeks.)
(units per year)
order cost (SAR)
Determine the annual cost when Tamama uses the strategy to deliver the milks:
a. [2 Marks] independently, i.e. each type of milk is ordered independently of
b. [2 Marks] jointly, i.e. all three types of milk are included each time an order
c. [1 Mark] Which strategy is recommended?