Blues Inc.
Memo
To: Myra Reid
From: Jack Daniels
Date: 9/15/2008
Re: Blues INC, Future Forecasts
Sales and advertising forecasts
Mrs. Reid,
Recently I was asked to forecast factors at Blues inc. First I was asked to look at 3 factors that relate to the budget and determine which one was most important. Out of the three choices it was determined that sales are the most important variable. The company’s current advertising budget is $162 million and since there is a direct correlation to advertising and sales this has been increased to 167 million.
Next we looked at two averaging models, the simple and the k-period. For the data required, we found that a 2 year k-period model was the best fit and then were able to determine that production levels should be increased. Based on the data from the models, I recommended that production levels be increased to 48 million units.
Myra stated that the sales forecasts allowed her to fix the production levels and my help in accurately estimating the needed levels to maintain a 10 percent inventory stock would then be required. Using the averaging model, it was discovered that over six years, quarter one reflected a lower sales amount as with quarter three. However the model also reflected that over these same six years quarter two would be at a slightly higher level and quarter four has the highest sales.
To find this trend I used an averaging model with a centered moving average. This gave an idea that overall, first quarter sales were approximately $10.24 million, second quarter sales were $12.72 million, third quarter sales were $11.5 million, and 4th quarter sales were $18.2 million.
Based on this trend, I was able to recommend to Myra that to stay within the ten percent inven ...