Quantitative Methods : Linear Trends, Regression and Forecasting
Response to the following questions:
1. The CEO of a small company is concerned about the continual growth in manufacturing costs over the past few years. The following is a time series of the cost per unit (in dollars) for the companys leading product over the past 8 years.
A. graphic this time series. Does a linear trend appear?
B. Develop the equation for the linear trend component for the time series. What is the average cost increase per year?
|
Year
|
Cost per unit ($)
|
year
|
Cost per unit ($)
|
|
1
|
$20.00
|
5
|
$26.60
|
|
2
|
$24.50
|
6
|
$30.00
|
|
3
|
$28.20
|
7
|
$31.00
|
|
4
|
$27.50
|
8
|
$36.00
|
2. The ownership of a fast food chain wants to investigate the relationship between the daily sales volume in dollars of a company restaurant against the number of competitors within a 1 mile radius...
|
# of competitors within 1 mile
|
Sales in $
|
|
1
|
3600
|
|
1
|
3300
|
|
2
|
3100
|
|
3
|
2900
|
|
3
|
2700
|
|
4
|
2500
|
|
5
|
2300
|
|
5
|
2200
|
A. Develop a least squares estimated-regression-equation that relates dailysales volume to the number of competitor restaurants in the 1 mile radius.
B. Use the estimated regression equation developed in part A to forecast the daily sales volume for a particular company restaurant that has for competitors within a 1 mile radius.