Question

1.

The president of a small manufacturing firm is concerned about the continual growth in manufacturing costs in the past several years. The data series of the cost per unit for the firm’s leading product over the past 8 years is as follows:

Year	Cost/Unit ($)	Year	Cost/Unit ($)
1	18.00	5	27.00
2	22.50	6	28.00
3	30.00	7	36.00
4	26.00	8	35.00

Develop a simple linear regression model for these data. What average cost increase has the firm been realizing per year? Do not round intermediate calculations. Round your answers to four decimal places.

The regression equation is Unit Cost = ___ + ___ Year

The average cost increase per year is $

2. The historical sales for a certain model of a single serve coffee maker at a specialty cookware store in units is: January, 28; February, 18; March, 19; April, 23; May, 20, and June, 25. Use single exponential smoothing with α = 0.2, and compute the exponential smoothing forecasts for February through June. Do not round intermediate calculations. Round your answers to two decimal places.

Month	Observation	Forecast
January	28	28
February	18
March	19
April	23
May	20	24.28
June	25	23.42

Answer 1

1)

Linear regression equation is determined using least square method as follows:

The regression equation is Unit Cost = __18.0894__ + __2.1607__ * Year

The average cost increase per year is = slope = $ 2.1607