Part A—Forecasting

The sales for Grandpa’s Greasy Spoon are given in “Forecasting” of project 3. Analyze this data to
answer the following questions.

1. Plot the data using a scatter plot. Then, pick any data point, right click and insert a trend line.
Change the trend line to a polynomial trend line of the third order. Display the equation and R2
value on the chart. Do you see any sort of seasonal trend? If so, what is that trend?
2. Use the equation that Excel gave you above to predict what the sales will be in month 25.
Computer the MSE to compare to other methods later.
3. Use Excel to computer a 3-Month Moving Average, and a 3-Month weighted moving average for
the sales. For the 3-month WMA use the following weights…
t-1=0.80 t-2=0.15 t-3=0.05

…So that if you were predicting sales for April, you would weight March at 80%, February at
15%, and January at 5%.

4. Compute the MSE of each of the three methods you used in parts 1 & 2 above. Based on this,
which is the most accurate and why? Use the most accurate method to predict the sales for
January 2020.
5. Which of the three methods provided you with the most accurate forecast. Was the benefit of
the extra accuracy worth the time it took to do this method? Why or why not?

Part B—EOQ

MamaMia’s Pizzeria purchases its boxes from a printing supplier. MMs delivers on average 200 pizzas
each month. Boxes cost 20 cents each and each order costs $10 to process. Because of limited storage
space, the manager wants to charge inventory holding at 30% of cost. Lead time to get the boxes once
they are delivered is 7 days. MMs is open 360 days per year. To make the math easier, assume 30 days
in each month.

1. What is the economic Order Quantity (EOQ)?

2. What is the reorder point if we have no safety stock? What if we want to have a safety stock of
20 boxes?
3. How many orders per year will we need to make?
4. What is the total annual cost? Be sure to include the cost of the actual boxes.
5. Your supplier has offered you a deal. She will give you the boxes for 15 cents each if you will
order at least 4,000 at a time. Is this a good deal for you? Why or why not? What kind of price
would you need to get in order to make it a good deal?