Question

Question 2 (4 Marks) Heavy Metal Manufacturing (HMM) has achieved average quarterly sales (in units) over the last four years as shown in the table below. HMM ships their products to Asia in Cargo freighters that must be negotiated and contracted at the beginning of the year to minimize costs. They are trying to decide how many sea shipments that they expect to need throughout the coming year. emand (units 4 - Year Average 685,000 715,000 750,000 700,000 Quarter 4 c) (0.5 Mark each) Using all of the data, calculate the indices for the following quarters: Q4 d) (0.5 Mark each) HMM Managers expect the total demand to be 3,200,000 units next year. Based on the indices calculated above, how many shipments are required each quarter if a cargo ship can hold 40,000 units at a time? Q1 Q4

Answer 1

c)

Quarter	Demand	Seasonal indices = Demand / Average of 4 years
1	685000	0.961
2	715000	1.004
3	750000	1.053
4	700000	0.982
Total	2850000
Average demand of 4 years	7125000

Total demand = 2850000

Average of demand = 2850000/4= 7125000

Seasonal indices for a quarter = Avg. Demand of quarter / Average demand of 4 years , For Q1 = 685000 / 7125000 = 0.961. Similarly calculated for Q2, Q3, and Q4

Part d) Average Demand * Seasonal indices of Quarter = Demand of the quarter

Average demand of next year = 3200000/4 = 800000

For Quarter 1 , Demand = Seasoindicesdice * 800000 = 0.961 * 800000 = 769123 (rounded off)

Quarter	Demand
1	769123
2	802807
3	842105
4	785965
Total	3200000

Each cargo holds 40000 shipments. Hence demand needs to be divided by 40000 to arrive at cargos requirement.

Quarter	Demand	Cargo required = Divide demand / 40000	Cargos required ( Rounded)
1	769123	19.23	19
2	802807	20.07	20
3	842105	21.05	21
4	785965	19.65	20
Total	3200000