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What Are The Costs Associated With Forecasting

Forecasting allows managers to prepare budgets, optimize inventory levels, and reduce costs. It provides insight into financial planning to pay suppliers and operational expenses. Anticipating demand helps determine when to adjust staffing levels and resources to ensure smooth business operations, but this predictability comes at a cost. The Delphi method is a commonly used qualitative forecasting approach where experts anonymously provide written opinions over multiple iterations with feedback to generate forecasts. Simple regression examines the relationship between two variables, a predictor and response, through a line's slope and intercept using one predictor. Simple correlation expresses the strength of the relationship between two variables but does not imply causation.

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Valerie Ann
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54 views1 page

What Are The Costs Associated With Forecasting

Forecasting allows managers to prepare budgets, optimize inventory levels, and reduce costs. It provides insight into financial planning to pay suppliers and operational expenses. Anticipating demand helps determine when to adjust staffing levels and resources to ensure smooth business operations, but this predictability comes at a cost. The Delphi method is a commonly used qualitative forecasting approach where experts anonymously provide written opinions over multiple iterations with feedback to generate forecasts. Simple regression examines the relationship between two variables, a predictor and response, through a line's slope and intercept using one predictor. Simple correlation expresses the strength of the relationship between two variables but does not imply causation.

Uploaded by

Valerie Ann
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1) What are the costs associated with forecasting?

- Managers are forecasting to estimate future cost in order to prepare their


budgets and finances. For example, it allows business to effectively optimize
inventory and increasing inventory turnover rates and reducing holding cost.
Another is to have insight about how business will accurately budget finances
to pay suppliers and other operational cost. Anticipating demands means
knowing when to increase staffs and other resources to keep business run
smoothly which will mean to another cost.
2) Summarize the key features of more commonly used forecasting method.
- There two forecasting methods: 1)OPINION AND JUDGMENTAL
METHODS or the qualitative method and 2)TIME SERIES METHOD or the
quantitative method. The most commonly used forecasting method is under
qualitative method which is “Delphi Method”. Here there are a panel of
experts is questioned about situation, and based on their written opinions,
analysis is done to come up with a forecast. The four characteristic features
of Delphi Method are: 1) anonymity, 2) iteration with controlled feedback, 3)
statistical group response and 4) expert input.

3) Distinguish a)simple regression and b) simple correlation


- Simple regression, a commonly used form of regression. It expresses the
relationship of two variables in terms of the slope and intercept of the line. The two
variables: denoted x, is regarded as predictor or independent variable while the
denoted y, is regarded as response or dependent variable. Simple regression is
concern about the study of only one predictor variable. While simple correlation, it
expresses the closeness or strength of the relationship between two variables.

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