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Discuss the high-low method and regression analysis

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Reference no: EM131768247

ACME Designs is a large merchandiser of apparel for budget-minded families. Management recently became concerned about the amount of inventory carrying costs and transportation costs between warehouses and retail outlets. As a starting point in further analyses, Mike Hancock, the controller, wants to test different forecasting methods and then use the best one to forecast quarterly expenses for 2012. The relevant data for the previous three years follows:

Quarter

Warehouse and Transportation Expense

1/2009

$12,500

2

11,300

3

11,600

4

13,700

1/2010

12,900

2

12,100

3

11,700

4

14,000

1/2011

13,300

2

12,300

3

12,100

4

14,600

The results of a simple regression analysis using all 12 data points yielded an intercept of $11,854.55 and a coefficient for the independent variable of $126.22 (R-squared = .19, t = 1.5, SE = 974).

  1. Run the regression in Microsoft Excel and verify the results above.
  2. Calculate the quarterly forecasts for 2012 using the high-low method and regression analysis. Recommend which method Mike should use and explain why.
  3. How has your analysis in Part 2 change if ACME Designs is involved in global sourcing of products for its stores?

Reference no: EM131768247

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