You have reached the end of the second year of selling Product Y. Below are the
ID: 443682 • Letter: Y
Question
You have reached the end of the second year of selling Product Y. Below are the monthly sales figures, by unit, from the year (20X2).
By Month (20X2)
Number of units (Product X)
January
12,000
February
13,500
March
14,000
April
15,000
May
16,000
June
15,000
July
14,000
August
13,000
September
12,000
October
11,000
November
10,500
December
9,000
Total
155,000
Current cost structure for Product Y is as follows:
Direct Material - $6 per unit
Direct Labor - $20 per hour (it takes 1 hour to build one unit)
Overhead - $500 per 15000 units produced
Activity:
Plot the current units of Product Y for 20X2 on a graph. Determine the appropriate mathematical model to forecast future trend, based on the growth rate and expectations, in monthly unit sales expected. Explain your forecast. Draw a timeline for production of Product Y by applying a forecast for Manufacturing Requirements Planning (MRP). Explain what you think is happening to the demand for Product Y. Determine the total cost of goods manufactured in 20X2 and calculate the variance from your budget (forecast x cost of the 3 elements of manufacturing) – what is the different between your budgeted cost of goods manufactured and the actual cost of goods manufactured (use the new costs for Product Y). Explain what you think is happening to the demand for Product Y.
By Month (20X2)
Number of units (Product X)
January
12,000
February
13,500
March
14,000
April
15,000
May
16,000
June
15,000
July
14,000
August
13,000
September
12,000
October
11,000
November
10,500
December
9,000
Total
155,000
Explanation / Answer
The appropriate mathematical model is by using moving average forecast.This is because sales of this product was first increasing but is declining rapidly. Therefore it doesn't follow linear/logarithmic/polynomial trend.
Declining trend could be due to product Y having completed its life cycle.The product may have arised interest atfirst but now only laggard are interested.This could also mean that another competitive product at lower price or exciting new product has launched.Hence Firm should invest more in manufacturing to enthuse product.
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