Assignment 2
Submission Date: 9th June 2015
Case Problem 1: Forecasting Sales
The Vintage Restaurant is located on Captive Island, a resort community near Fort Myers, Florida. The
restaurant, which is owned and operated by Karen Payne, Just completed its thirds year of operation.
During this time, Karen sought to establish a reputation for the restaurant as a high-quality dining
establishment that specialized in fresh seafood. The effort made by Karen and her staff proved
successful, and her restaurant is currently one of the best and fastest-growing restaurants on the island.
Karen concluded that to plan better for the growth of the restaurant in the future, she needs to develop
a system that will enable her to forecast food and beverage sales by quarter for up to one year in
advance. Karen compiled the following data on total food and beverage sales for the seven years of
operation:
Food and Beverage Sales for the Vintage Restaurant ($1000s)
Year
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Total Sales
15
10
35
10
18
15
50
14
26
23
12
75
19
28
25
18
90
22
34
28
21
105
24
36
30
20
110
28
40
35
27
130
Managerial Report
Perform an analysis of the sales data for the Vintage Restaurant. Prepare a report for Karen that
summarizes your findings, forecasts, and recommendations. Include the following:
1. A graph of the time series.
2. An analysis of the seasonality of the data. Indicate the seasonal indexes for each quarter, and
comment on the high seasonal indexes make intuitive sense? Discuss.
3. Forecast sales for first Quarter through fourth quarter of the eighth year.
4. Assume that first quarter sales for the eighth year turned out to be $29,500. What was your forecast
error? If this error is large, Karen may be puzzled about the difference between your forecast and
the actual sales value. What can you do to resolve her uncertainty in the forecasting procedure?
5. Recommendations as to when the system that you developed should be updated to account for new
sales data that will occur.
6. Detailed calculations of your analysis in an appendix to your report.
Case Problem 2: Inventory Control
LaPlace Power and Light
The Southeastern Division of LaPlace Power and Light Company is responsible for providing
dependable electric service to customers in and around the areas of Metairie, Kenner, Destreban,
LaPlace, Lutcher, Hammond, Pontchatoula, Amite, and Bogalusa, Louisiana. One material used
extensively to provide this service is the 1/o AWG aluminum triplex cable, which delivers the
electricity from the distribution pole to the meter loop on the house.
The Southeastern Division storeroom purchases the cable that this division will use. For the coming
year, this division will need 499,500 feet of this service cable. Since this cable is only used on routine
service work, practically all of it is installed during the five normal work days. The current cost of this
cable is 41.4 cents per foot. Under the present arrangement with the supplier, the Southeastern
storeroom must take one-twelfth of its annual need every month. This agreement was reached in
order to reduce lead time by assuring LaPlace a regular spot in the supplier's production schedule.
Without this agreement, the lead time would be about twelve weeks. No quantity discounts are offered
on this cable; however, the supplier requires that a minimum of 15,000 feet be on an order. The
Southeastern storeroom has the space to store a maximum of 300,000 feet of 1/o AWG aluminum
service cable.
Associated with each cable shipment are ordering costs of $50, which include all the costs from
making the purchase requisition to issuing a check for payment. In addition, inventory carrying costs
(including taxes) on all items in stores are considered to be ten percent of the purchase price per unit
per year.
Being a government-regulated, investor-owned utility, both the Louisiana Public Service Commission
and its stockholders watch closely how effectively the company, including inventory management, is
managed.
Managerial Report
Develop a report for management of LaPlace Power and Light Company to
Evaluate the effectiveness of the current ordering system. Can it be improved?
Include the following factors in your report:
1. An analysis of optimum order quantity and reorder point.
2. Total Inventory Cost.
Present Total Cost
Optimal Total Cost
Case Problem 3: Statistical Quality Control
STEELE BREAKFAST FOODS INC.
Steele Breakfast Foods Inc. produces a popular brand of raisin bran cereal. The package indicates it
contains 25.0 ounces of cereal. To ensure the product quality, Steele inspection department makes
hourly checks on the production process. As a part of the hourly check, four boxes are selected and
their contents weighted. The results for 15 samples are reported below:
Sample Number
Weight-1
Weight-2
Weight-3
Weight-4
26.1
24.4
25.6
25.2
25.2
25.9
25.1
24.8
25.6
24.5
25.7
25.1
25.5
28
25.1
25
25.2
25.2
26.3
25.7
26.6
24.1
25.5
24
27.6
26
24.9
25.3
24.5
23.1
23.9
24.7
24.1
25
23.5
24.9
10
25.8
29
24.3
27.3
11
22.5
23
23.7
24
12
24.5
24.8
23.2
24.2
13
24.4
24.5
25.9
25.5
14
23.1
23.3
24.4
24.7
15
24.6
25.1
24
25.3
The professor suggested obtaining another set of samples, this time using a larger sample size and taking more
samples. They also make hourly checks on the production process and 5 boxes are selected. He had calculated
sample means and range values. The results are shown in the following table.
Sample Number
Mean
Range
Sample Number
Mean
Range
25.4
1.7
13
25.2
2.3
25.1
1.1
14
24.7
2.4
24.2
1.2
15
24.6
2.5
24
1.8
16
23.4
2.5
24.2
1.1
17
23.6
2.6
25.4
2.6
18
23.6
2.7
25.1
2.7
19
25.4
2.8
24
1.6
20
25.1
2.8
23.8
1.5
21
25.1
2.9
10
24.5
2.1
22
25.2
3.0
11
25.4
2.2
23
23.6
3.1
12
25.1
2.2
24
25.4
3.1
25
25.1
3.2
Managerial Report
Consider the following questions, and then write a brief report to Steele Breakfast Foods Inc. based on
the two samples.
1. How did you conclude that the process was not capable based on the first set of samples?
2. Does the second set of samples show anything that the first set didnt? Explain what and why.
3. Assuming the problem can be found and corrected, what impact do you think this would have on
the capability of the process?
