Sales Forecast Modeling. Jeng-Mei Chen, Inc.

1. Sales Forecast Modeling. Jeng-Mei Chen, Inc., an upscale Manhattan restaurant, would like to generate a sales forecast based on the assumption that next year sales are a function of current income, advertising, and advertising by a competing restaurant:A. Write an equation for predicting sales based on the assumption that the percentage change in sales is twice as large as the percentage change in income and advertising; but only one-fourth as large as, and of the opposite sign of, the percentage change in competitor advertising. Use the symbols S = sales, Y = income, A = advertising, and CA = competitor advertising.B. During the current year, sales total $2,000,000, income is $84,700 per capita, advertising is $500,000, and competitor advertising is $300,000. Previous period levels were $77,000 (income), $400,000 (advertising), and $400,000 (competitor advertising). Forecast next year sales.2. Cost Forecast Modeling. John Carter, an intern at Medical Products, Inc., is evaluating the cost effectiveness of a training program in his department. Carter believes that the monthly rejection rate is inversely related to the hours spent each month on worker training.A. Write an equation to predict next month’s rejection rate using the symbols R = rejection rate, T = worker training, t = time, a0 = constant term, a1 = regression slope coefficient, and assuming that the rejection rate in the forecast month decreases by twice the percentage increase in worker training during the preceding month.B. If 40 hours were spent last month on worker training and this month’s rejection rate was 60, what should the rejection rate be next month if worker training this month is 50 hours? Use the equation developed in part A.

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