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##### QM 670 Exam I Fall 2013

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Question;There are four items, each with four parts. Each part is worth six points. (Four points are free.)1. The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. They have debated whether the power cost should be treated as fixed, variable, or both. Using the following data you are charged to settle this issue and determine the best cost formula for Wheeler.QuarterMachine Hrs.Power Cost1200002600022500038000330000425004220003700052100034000618000290007240003600082800040000a. Find the estimated fixed cost associated with the machine hours.b. Find the estimated variable cost associated with the machine hours.42500c. Discuss your confidence in the use of these estimates.d. Would you recommend using this cost function? Explain.2. You are asked to predict orders for the next two periods. You have informationavailable for the overtime hours used for each quarter.Quarter1234567891011121314Orders5356526247464857434546533835Overtime2223253121222029231222261617a. Find the best method to predict orders.b. Discuss the model fit.c. Predict the orders for the next two periods.d. Would you recommend using this model? Explain.3. The data below are weekly figures from Herbert Hooleys Happy House (except forthe quarterly error figures). They sell radios, TVs, and VCRs in their electronicsdepartment. He needs you to help him with a few things, which he will indicate toyou.Profit6318.964721.575049.165249.445290.085924.415251.974805.725278.605301.776121.985416.636552.896352.936693.015761.975419.505474.644650.874781.91Revenue8395.916300.286747.557028.567116.417951.007031.096462.887162.427136.358249.847244.798718.218494.028881.757669.107265.387302.976335.896438.23Radios3626332932413631464345294346554833354148TVsVCRs6548515352585247495159556763685854554245Quarter4839404549524444514656464851433947444939Errors2000 - 342001 - 12342002 - 12342003 - 12342004 -1232461923344922203151162637482224a. Doug, I could surely use some help. I would like to find a useful profit formulafor my department. Please let me know if it is a good model, and if there are anypotential issues I should consider. Note that the numbers of radios, TVs, andVCRs represent the number held on hand for the week. Please find the bestmodel for Herb.b. Discuss the model.c. Are there other issues to consider here? Explain.d. What is your recommendation regarding use of this model? Explain.4. The Bubble Up Bottling Company of Brussels, Belgium, is interested in forecastingregional sales of Bubble Up over the next two years. The company has analyzedBubble Ups market share for its region over the past twenty quarters. Market sharehas generally been growing as indicated in the following table:Year11112222333344445555SeasonWinterSpringSummerFallWinterSpringSummerFallWinterSpringSummerFallWinterSpringSummerFallWinterSpringSummerFallBubble Ups Market Share (in %)6.426.586.996.827.157.337.457.557.667.697.717.817.857.847.887.937.998.048.048.05During the same five-year period, total soft drink sales in the region (as measured in100,000s of cases) have been as follows:Year11112222333344445555SeasonWinterSpringSummerFallWinterSpringSummerFallWinterSpringSummerFallWinterSpringSummerFallWinterSpringSummerFallSales in Region (in 100,000s of cases)114130158131114146177142124151175146132160184144134166205148The company wants to forecast sales for the next two years (6 and 7).a. What approach will you use for this problem? Explain.b. Obtain forecasts for the next two years.c. Discuss the performance of your method.d. What is your recommendation regarding the use of your method?

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