Expert answer:solve some questions

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QM 670 Exam I – Fall 2017
This exam is worth 80 points. The first three items have four parts. Each part is worth
six points. The final two items are worth three points each. (Two 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.
Quarter
Machine Hrs.
Power Cost
1
20000
26000
2
25000
38000
3
30000
42500
4
22000
37000
5
21000
34000
6
18000
29000
7
24000
36000
8
28000
40000
a. Find the estimated fixed cost associated with the machine hours.
b. Find the estimated variable cost associated with the machine hours.
c. 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 information
available for the overtime hours used for each month.
Month
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Orders
53
56
61
63
67
74
73
77
84
87
88
94
92
99
Overtime
22
23
25
31
21
22
20
29
23
12
22
26
16
17
a. 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 Hooley’s Happy House (except for
the quarterly error figures). They sell radios, TVs, and VCRs in their electronics
department. He needs you to help him with a few things, which he will indicate to
you.
Profit
6318.96
4721.57
5049.16
5249.44
5290.08
5924.41
5251.97
4805.72
5278.60
5301.77
6121.98
5416.63
6552.89
6352.93
6693.01
5761.97
5419.50
5474.64
4650.87
4781.91
Revenue
8395.91
6300.28
6747.55
7028.56
7116.41
7951.00
7031.09
6462.88
7162.42
7136.35
8249.84
7244.79
8718.21
8494.02
8881.75
7669.10
7265.38
7302.97
6335.89
6438.23
Radios
36
26
33
29
32
41
36
31
46
43
45
29
43
46
55
48
33
35
41
48
TVs
VCRs
65
48
51
53
52
58
52
47
49
51
59
55
67
63
68
58
54
55
42
45
48
39
40
45
49
52
44
44
51
46
56
46
48
51
43
39
47
44
49
39
Quarter
Errors
2000 – 3
4
2001 – 1
2
3
4
2002 – 1
2
3
4
2003 – 1
2
3
4
2004 -1
2
32
46
19
23
34
49
22
20
31
51
16
26
37
48
22
24
a. “Doug, I could surely use some help. I would like to find a useful profit formula
for my department. Please let me know if it is a good model, and if there are any
potential issues I should consider.” Note that the numbers of radios, TVs, and
VCRs represent the number held on hand for the week. Please find the best
model 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. What is the best answer given this information?
Model 1
Model 2
X-variables
6
4
2
R
.9344
.9277
2
Adjusted R
.9058
.9133
MSE
5867.53
5746.09
a.
b.
c.
d.
e.
Model 3
3
.8761
.8497
5844.78
Model 1 performs the best in all areas.
Model 3 performs better than Model 2.
We would most likely prefer Model 1.
We would most likely prefer Model 2.
We would most likely prefer Model 3.
5. The table below features three forecasting models used on the same set of data.
Type
MSE
Model 1
Exponential
Smoothing
8755.3
Model 2
Regression
Model 3
Seasonal & Trend
4876.2
5945.8
Based solely on the information in this output, which of the following si the best
answer?
a.
b.
c.
d.
e.
The data set contains no trend or seasonality.
The data set contains trend but no seasonality.
The data set contains seasonality but no trend.
The data set probably contains cyclicality.
The data set contains both trend and seasonality.
…
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