The manager of a tire store in Minneapolis has been concerned with the high cost
ID: 2944221 • Letter: T
Question
The manager of a tire store in Minneapolis has been concerned with the high cost of inventory. The current policy is to stock all the snow tires that are predicted to sell over the entire winter at the beginning of the season (end of October). The manager can reduce inventory costs by having suppliers deliver snow tires regularly from October to February. However, he needs to be able to predict weekly sales to avoid stockouts that will ultimately lose sales. To help develop a forecasting model, he records the number of snow tires sold weekly during the last winter and the amount of snowfall (in inches) in each week.
a.Develop a regression model and use a software package to produce the statistics.
Explanation / Answer
Regression shows you what effect, if any, changing one variable has on another variable. This is not necessarily a cause and effect relationship, but simply a correlation. In your case, the amount of snow should have some effect on how many snow tires are sold...(but the amount of snow tires sold does not make it snow more or less ;) Set up your model so that snow is normally where you would put the "x" axis...and tires sold on the "y" axis....and you should be in good shape.
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