Clothes for U Is a Large Merchandiser of Apparel for Budget-Minded

question 29

Essay

Clothes for U is a large merchandiser of apparel for budget-minded families. Management recently became concerned about the amount of inventory carrying costs and transportation costs between warehouses and retail outlets. As a starting point in further analyses, Gregory Gonzales, the controller, wants to test different forecasting methods and then use the best one to forecast quarterly expenses for 2013. The relevant data for the previous three years follows: The results of a simple regression analysis using all 12 data points yielded an intercept of $11,854.55 and a coefficient for the independent variable of $126.22 (R-squared = .19, t = 1.5, SE = 974).
Required:
(1) Calculate the quarterly forecasts for 2013 using the high-low method and regression analysis. Recommend which method Gregory should use and explain why.
(2) How does your analysis in requirement 1 change if Clothes for U is involved in global sourcing of products for its stores?

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