Quincy has been gathering data for over five years now. He has a record of how many customers he had each month. He also has information on the weather, for example, which month has the most rain. Quincy wants to use this data to improve his forecasting. He has a choice of cause-and-effect models. Based on what data he has and what he wants to do, what would be the best method from the choices he has? Explain the elements of the forecasting equation.
Read the following passage and answer the question that follows
Quincy Snodgrass Enterprises—
Quincy Snodgrass is an entrepreneur and a lover of the outdoors. He has worked for various companies since he graduated college with his business administration degree in management. Over the years, he has saved every extra penny and now has the starting capital he needs; consequently, he plans to open his own business. Quincy plans to open a landscaping business. The primary services he’ll offer are grass cutting, edging, and bush trimming. Obviously, this will only provide income in the spring, summer, and early fall. Therefore, he plans to offer snow removal in the winter. His goal is to continue to provide those baseline services and expand into actual landscaping work.
Quincy’s initial challenge is to develop a forecast of how many customers he’ll have each month. This is essential to determine if he needs to hire any additional labor throughout the season. Unfortunately, none of the jobs Quincy has had involved forecasting. Quincy is digging deep into his memory to recall his
Quincy is a numbers guy and is partial to using a quantitative method if possible, but he doesn’t rule out the option of using one of the qualitative methods. He had worked many summers for other yardwork companies. Knowing he wanted to own his own business someday, Quincy took notes on how things went. Since his customer base would be in a series of small towns, Quincy knows he cannot charge as much as the companies that served larger communities. Consequently, volume is necessary to earn the revenue he will need.
Quincy focused on three small towns, Smithburg with a population of 700, Emeryville with 1,800, and Golf Creek with 2,500. He believes he can get 10 percent of the homes in each town to hire him. Quincy used information from the county files to estimate that on average, the number of homes is equal to about 25 percent of the population, meaning in Smithburg (700) the potential number of homes is about 175. Quincy believes his calculations are reasonable and could be the foundation for using a qualitative method to kick off his forecasting.
- Quincy has been gathering data for over five years now. He has a record of how many customers he had each month. He also has information on the weather, for example, which month has the most rain. Quincy wants to use this data to improve his forecasting. He has a choice of cause-and-effect models. Based on what data he has and what he wants to do, what would be the best method from the choices he has? Explain the elements of the forecasting equation.
The most effective cause-and-effect technique, according to the data Quincy has gathered, would be multiple regression. Quincy is dealing with two explanatory variables since he has gathered monthly updated consumer data as well as daily weather data. The monthly demand is influenced by both factors. The best and worst case scenarios are determined using the average number of dwellings from prior years.
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