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James Inc. is a mid-sized manufacturer of residential water heaters. Sales have grown during the last several years, and the company's production capacity needs to be increased. The company's management wonders if national housing starts might be a good indicator of the company's sales: National James Inc Housing Starts (millions) Annual Sales Year (millions of dollars) I 6.2 57 2 5.1 59 3 6.5 65 4 7.9 78 5 6.3 72 6 7.4 80 7 7.0 86 a. Develop a simple linear regression analysis between James Inc' sales and national housing starts. Forecast James Inc' sales for the next two years. The National Home Builders Association estimates that national housing starts will be 7.1 million and 8.0 million for the next two years. b. What percentage of variation in James Inc' sales is explained by national housing starts? c. Would you recommend that James Inc management use the forecast from Part a to plan facility expansion? Why or why not? What could be done to improve the forecast?

James Inc. is a mid-sized manufacturer of residential water heaters. Sales have grown during the last several years, and the company's production capacity needs to be increased. The company's management wonders if national housing starts might be a good indicator of the company's sales: National James Inc Housing Starts (millions) Annual Sales Year (millions of dollars) I 6.2 57 2 5.1 59 3 6.5 65 4 7.9 78 5 6.3 72 6 7.4 80 7 7.0 86 a. Develop a simple linear regression analysis between James Inc' sales and national housing starts. Forecast James Inc' sales for the next two years. The National Home Builders Association estimates that national housing starts will be 7.1 million and 8.0 million for the next two years. b. What percentage of variation in James Inc' sales is explained by national housing starts? c. Would you recommend that James Inc management use the forecast from Part a to plan facility expansion? Why or why not? What could be done to improve the forecast?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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James Inc. is a mid-sized manufacturer of residential water heaters. Sales have grown during the last several years, and the company's production capacity needs to be increased. The company's management wonders if national housing starts might be a good indicator of the company's sales: National James Inc Housing Starts (millions) Annual Sales Year (millions of dollars) I 6.2 57 2 5.1 59 3 6.5 65 4 7.9 78 5 6.3 72 6 7.4 80 7 7.0 86 a. Develop a simple linear regression analysis between James Inc' sales and national housing starts. Forecast James Inc' sales for the next two years. The National Home Builders Association estimates that national housing starts will be 7.1 million and 8.0 million for the next two years. b. What percentage of variation in James Inc' sales is explained by national housing starts? c. Would you recommend that James Inc management use the forecast from Part a to plan facility expansion? Why or why not? What could be done to improve the forecast?
Transcribed Image Text:James Inc. is a mid-sized manufacturer of residential water heaters. Sales have grown during the last several years, and the company's production capacity needs to be increased. The company's management wonders if national housing starts might be a good indicator of the company's sales: National James Inc Housing Starts (millions) Annual Sales Year (millions of dollars) I 6.2 57 2 5.1 59 3 6.5 65 4 7.9 78 5 6.3 72 6 7.4 80 7 7.0 86 a. Develop a simple linear regression analysis between James Inc' sales and national housing starts. Forecast James Inc' sales for the next two years. The National Home Builders Association estimates that national housing starts will be 7.1 million and 8.0 million for the next two years. b. What percentage of variation in James Inc' sales is explained by national housing starts? c. Would you recommend that James Inc management use the forecast from Part a to plan facility expansion? Why or why not? What could be done to improve the forecast?
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