Misusing the percent of sales method

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Reference no: EM131856823

(Misusing the percent of sales method?) The Caraway Seed Company has grown rapidly over the last decade and is trying to forecast the? firm's inventory requirements for the next 5 years. Historical sales and inventories for the last 10 years are found in the popup? window, along with projected sales for the next 5 years.

SALES INVENTORIES

2005 5,450,000 1,480,692

2006 6,200,000 1,944,369

2007 6,940,000 1,899,147

2008 5,750,000 1,530,552

2009 6,055,000 1,956,425

2010 7,200,000 1,919,339

2011 7,450,000 1,920,914

2012 8,010,000 2,006,555

2013 8,775,000 2,102,646

2014 9,990,000 2,427,487

2015 11,300,000

2016 11,600,000

2017 12,600,000

2018 12,900,000

2019 13,600,000

a. Use the percent of sales method for forecasting? Caraway's inventories for the next 5 years if the percent of sales is equal to the average of the percent of sales for the last 10 years.

b. The following? graph?, includes a plot of the historical relationship between inventories and sales along with a line representing the percent of sales forecast. Analyze the forecast line compared to the plot of inventory and sales to see if you see any problems with the percent of sales forecast. Discuss.

Using the average of the percent of sales for the last 10? years, what are the projected inventories for? 2015? $ (Round to the nearest? dollar.) Using the average of the percent of sales for the last 10? years, what are the projected inventories for? 2016? $ (Round to the nearest? dollar.) Using the average of the percent of sales for the last 10? years, what are the projected inventories for? 2017? ?$ (Round to the nearest? dollar.) Using the average of the percent of sales for the last 10? years, what are the projected inventories for? 2018? $ (Round to the nearest? dollar.) Using the average of the percent of sales for the last 10? years, what are the projected inventories for? 2019? ?$ (Round to the nearest? dollar.)

Reference no: EM131856823

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