Stellar Foods Incorporated produces a variety of food products including a line of candies. One of its most popular candy items is “For the Stars,” a bag of individually wrapped star‐shaped candies made from a blend of premium ingredients. The item is relatively expensive so Stellar Foods only produces it for its eastern market encompassing urban areas such as New York, Atlanta, Philadelphia, and Boston. The item is not sold in grocery or discount stores but mainly in specialty shops and specialty groceries, candy stores, and department stores. Stellar Foods supplies the candy to a single food distributor, which has several warehouses on the east coast. The candy is shipped in cases with 60 bags of candy per case. For the Stars sell well despite the fact that they are expensive at $12.95 per bag (wholesale). Stellar Foods uses high‐quality, fresh ingredients and does not want to store the candy in inventory for more than 4 months.
Stellar’s distributor believes that demand for the candy follows a seasonal pattern. It has collected demand data (i.e., cases sold) for For the Stars from its warehouses and the stores it supplies for the past 3 years (see Table 2). Because of their limited production capacity, Stellar foods sets its production schedule for the candies four times a year instead of each month. Address the following items based upon the demand data provided to aid Stellar Foods in forecasting the For the Stars production schedule for the upcoming year. You may use Excel for parts (a) through (c) but your work for each part must be clearly labeled so that it is easy to follow within the spreadsheet. The work as well as the answers to part (d) should be shown in your exam document. Round answers to 3 decimal places. Be sure to upload your spreadsheet with your exam document.
a) Graph the demand per month for each of the 3 years and the total demand for the candy. [Note: This should result in 2 separate graphs – one containing years 1‐3 demand data (3 separate lines) and one containing the total demand for the 3 years (one single line)]. (5)
b) Use linear regression to forecast the demand for Year 4. (Note: Provide the formula used to calculate this demand – e.g. y = a + bx.) (5)
c) Divide the annual demand into 4 quarters and identify the quarterly seasonal demand distribution (i.e., the proportion of the annual demand accounted for by each period). (5)
d) Based on the seasonal pattern, what is the forecasted demand for each quarter in Year 4. (5)
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