1st Answer

Introduction: Demand forecasting refers to an aspect of business analytics that

would emphasize on the prediction of the level of needs for a particular product or a
service in the future.
Concept:
The forecast of the demand can either be subjective or objective. Subjective
forecasts, which are based on the opinions and educated guesses are often
considered to be very useful in order to ensure that the demand can be predicted
when the products and services are new in the market, and when historical data isn’t
available.
Objective forecasts, on the other hand, are total qualitative. This kind of forecast
makes the best use of historical data and the statistical, data mining as well as
machine learning tools and software, in order to quantity the forecast with some
mathematical scores:
In order to handle the rising variety and complexity of the demand forecast, three
basic kind of demand forecasting has been developed in recent years:
Qualitative demand forecasting: It enables to predict the future sales with the use of
opinions and instincts of potential consumers, sellers and experts of the industry.
Time series demand forecasting: It would rely on historical data and would assume
that the trends of demand would not vary significantly year over year.
Casual demand forecasting: It often takes external economic indicators into account
and make use of regression models in order to look for a relationship between
dependent and independent variables
Following are the steps for demand forecasting:
Demand forecasting refers to an extremely challenging task. One must be able to be
adaptable enough in order to deal with a sporadic influx of demand while also
ensuring that they think of long-term.
Following are some of the steps of demand forecasting:
Establish goals: Forecasting the demand must have a specific purpose. The main
function of this is to ensure the forecast is done with respect to how much, and when
the consumers would purchase.
Select a timeframe, a specific product or a general category and whether the
demand is being forecasted from the perspective of everyone or only a subset of
specific people.
It is important to make sure that it would meet the needs of the financial planners,
marketing of the product, logistics and operations team in a manner that is unbiased.
For proper planning of demand capacity, the forecaster has to first understand the
goals, and these will allow the forecaster to make use of the process of decision-
making forecasting in order to better understand the behaviour of online consumer.
Data collection and recording: Integration of all the data of sales channel enables to
provide a unified perspective of actual product demand and insight into the
forecasting of sales.
Knowing the time and date of orders, the SKU ordered, and the channel of sales
would enable the company to forecast projections of growth as well as trend at a
much more granular level, and also look back to see how the forecasts have
matched up to reality.
The forecaster also has to keep an eye for the e-commerce returns, and these can
be costly. Products having a high rate of return must be evaluated and adjusted
accordingly to the reasons of return. If 10% of items are returned and one can
reduce the number, the production may require to be adjusted as well.
Data collection and analysis: A repeatable process of data analysis is needed
whether it is done in a manual method or with the use of automation as well as
predictive analytics. This would entail comparison of the forecasted sales to the
actual sales in order to enable to adjust the next forecast.
If the brands had underestimated the volume, they would have had enough inventory
to ship orders and would not have had enough staff in order to fulfil them all on time.
If they overestimated the volume, they would have incurred a lot of extra money on
inventory that has been sitting and taking much longer in order to generate revenue
than anticipated.
Plan the finances accordingly: Once the company has established a loop for
feedback, they can make the next forecast and update the budget in order to allocate
the funds on the basis of growth targets. Demand forecasting would assist the
company in reducing the carrying cost of the inventory, planning the ad spends.
Headcount of the future, requirements of inventory and production and even
development of new products.
Factors influencing the demand: Demand forecasting refers to a proactive process
that would assist when it comes to determination of what products are needed
where, when and in what quantities. There are variety of factors that would influence
the forecasting of the demand.
Conclusion: So, it can be concluded that the steps of demand forecasting need to
be planned properly so as to ensure that an accurate forecast of demand is done.
2nd Answer
Introduction:
Quanti Total Total Total Average Average Average Marginal
ty Fixed Variable Cost Fixed Variable Total Cost
Cost Cost Cost Cost Cost
0 100 0 100 0 0 0 0
1 100 20 120 100.00 20.00 120.00 20
2 100 30 130 50 15 65 10
3 100 40 140 33.33 13.33 46.67 10
4 100 50 150 25.00 12.50 37.50 10
5 100 60 160 20.00 12.00 32.00 10

All the expenses pertaining to a business can be divided into two types of costs;
fixed and variable. Fixed costs are the expenses that don’t change on the basis of
sales. So, they refer to the set expenses the business has committed to that are not
tied to the volume of production.
Fixed Costs: They are relatively constant; they don’t change or vary much. The
electric bill, for instance, may increase a little more during the warm months because
of more usage.
In order to determine the total fixed costs of an organization, it is important to simply
add all of the fixed costs together. Total fixed costs refer to the sum of all individual
fixed costs.
Impact on Profitability: Some kinds of businesses consist of high amount of fixed
costs, perhaps due to large cost of equipment or the requirement of space. The cost
of acquiring the machinery and the space is high so, therefore, monthly payment are
very high no matter how many printing jobs the business would comprise of.
However, once those fixed costs are recouped and the company would reach its
break-even point, the costs that are associated with the production are usually very
low.
And, at the other end of the cost spectrum, companies having comparatively low
fixed costs, such as graphic designers or merchandising consultants, then have
much higher costs of variable. It doesn’t take much revenue for a service business to
break-even, usually, but the amount of profit that are generated after that point would
remain the same.
In general, keeping the fixed costs less is considered to be a good tactic.
Variable costs refer to the expenses that may vary in proportion to the volume of the
products or services that a business would produce. In other words, they are the
costs that would vary depending on the activity volume. The costs increase as the
volume of the activity would increase and lower as the volume would decrease.
Formula for variable costs:
Total variable costs = Total quantity of output * Variable cost per unit of production
output.
Average fixed cost refers to fixed expenses of production of the company that
concerns per unit of products that have been produced by it. With an increase in the
output of the production quantity, this average cost would reduce due to the fixed
cost being same while the number of production output would rise.
Average fixed cost formula:
It can also be calculated by subtracting the average variable cost of the organization
from the average of the total cost, as the total cost of the organization may either be
fixed or variable. If variable one gets reduced from the total cost, it would be
provided the fixed cost as a resultant.
AFC formula = Average Total Cost (ATC) – Average Variable Cost (AVC)
Average variable cost refers to the cost of all the variable expenses that are involved
in creation a product. Variable costs would change over a period of time, and they
may also depend on the production volume of the business, such as materials and
labour. These differ from the fixed costs, and these remain the same no matter how
many items the organization would produce and can involve the expenses, such as
facility rent.
The total variable costs involve all the variable cost for a run of production, while the
average cost would make it possible as well as easy in order to understand how
much these variable costs would cost total for each of the units produced.
Average variable cost = total variable cost / output
Marginal cost would represent the incremental costs that have been incurred when
producing an extra unit of a product or a service. It is calculated by taking the total
change in the cost of production of more products and dividing that by a change in
the number of products produced.
The Marginal Cost Formula is:
Marginal Cost = (Change in Costs) / (Change in Quantity)
Conclusion: So, it can be concluded that the various costs represent the costs
incurred by a company and it is very important to ensure that there is no error in
calculating any of the cost.
3rd Answer
3a.
Introduction: Income elasticity of demand would refer to the sensitivity ratio
between the quantity of a particular product and a change in real income of the
customers who would or would not prefer purchasing that product.
Concept:
The formula to measure the income elasticity of demand refers to the percentage
rise in the quantity of the demand divided by the rise in the rate of sales. With
income elasticity of a demand, it is possible to say whether a particular product
would represent an essential need or a luxury.
Income elasticity of demand:
Income elasticity of demand would test the sensitivity of demand in order to shift in
the price of a consumer for a particular product. The higher the income elasticity of
demand provided the absolute terms for a specific product, the higher would be the
reaction of the consumers with respect to the purchase habits if their real income
would shift. Businesses would usually evaluate income elasticity of demand for the
products in order to enable them to predict the effect of the cycle of a business on
the sales of a product.
Products may be loosely classified as inferior products and normal goods, and this
depends on the values of the income elasticity of the demand. Normal products have
a positive demand elasticity of income, as the sales go up, more products get
demanded.
Income elasticity
= % Change in quantity demanded / % Change in the income of individual
= 60 – 40/40 / 25000 – 20000/20000
= 0.50 / 0.25
= 0.20 or 20%
Conclusion: The income elasticity of demand is positive. (with a rise in income, the
demand also increases)

3b.
Introduction: Price elasticity refers to a measure of the relationship between a
change in the quantity demanded of a particular product and a change in its price.
Formula:
Price Elasticity of Demand = % change in Quantity Demanded / % Change in Price
If a small change in the price of a product gets accompanied by a large change in
the quantity demanded, the product is said to be elastic in nature with respect to its
demand. On the other hand, a product is said to be inelastic if a large change in the
price gets accompanied by a small amount of change in the demand of a quantity.
Gathering data on how customers would respond to a change in the price would help
to lower the risk and that feeling of uncertainty.
Having a knowledge pertaining to PED would enable to decide whether to raise or
lower the prices or whether to get into discrimination of the price. Price discrimination
refers to a policy that charges the consumers different prices for the same product. If
a demand is elastic, revenue is gained by lowering the price, but if the demand is
inelastic, revenue gained is by increasing the price.
Concept:
Price elasticity of demand
= % change in quantity demanded / % change in the price of a product.
= 25000 – 20000/20000 / 400 – 500 /500
= 5000 / 20000 / 100/ 500
= 0.25 / 0.20
= 1.25%

Conclusion: The price elasticity is positive (with a fall in price, quantity demanded
increases) As there is an inverse relationship between the price of a product and
quantity, the negative sign is ignored.