Reduced revenue makes controlling costs

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Reference no: EM133980872

Question

Kay and Michael Passe publish What's Happening?-a biweekly newspaper to publicize local events. What's Happening? has few subscribers; it typically is sold at checkout stands. Much of the revenue comes from advertisers of garage sales and supermarket specials. In an effort to reduce costs associated with printing too many papers or delivering them to the wrong location, Michael implemented a computerized system to collect sales data. Sales-counter scanners accurately record sales data for each location. Since the system was implemented, total sales volume has steadily declined. Selling advertising space and maintaining shelf space at supermarkets are getting more difficult.

Reduced revenue makes controlling costs all the more important. For each issue, Michael carefully makes a forecast based on sales data collected at each location. Then he orders papers to be printed and distributed in quantities matching the forecast. Michael's forecast reflects a downward trend, which is present in the sales data. Now only a few papers are left over at only a few locations. Although the sales forecast accurately predicts the actual sales at most locations, What's Happening? is spiraling toward oblivion. Kay suspects that Michael is doing something wrong in preparing the forecast but can find no mathematical errors. Tell her what's happening.

Reference no: EM133980872

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