ECO404 Managerial Economics Assignment 1 Solution Fall 2013

Bonanza Corporation established in 1976. Bonanza Garments started its
operation with only a handful of machines and individuals. Bonanza
Garments is the most successful, widely recognized and often imitated
clothing products in the history of Pakistan apparel industry. Over
successive generations, Bonanza Garments have secured the attention,
imagination and loyalty of diverse consumers. Especially Bonanza is a
leading brand for winter garments. With the vision to become leaders of
the industry, Bonanza strives to make each of its products, with careful
R&D and intensive innovation. It has proven its variety according to the
fashion parameters set by international industry experts. Company has a
constant sales growth rate of 35%. Its management wants to estimate the
impact and relationship between its total sales with its successive
products for a reliable future sale forecasting of winter sales. Company
wants to forecast the sales level for 2014 based upon previous sales
pattern that is as following:

Years Sales (In million)
2005 25
2006 27
2007 23 2008 20
2009 22
2010 18
2011 23
2012 29
2013 28
2014 ?

A. Forecast sales level of Bonanza Corporation for 2014 by using
three years and five years moving average method. And
analyze which moving average is the best for data forecasting?

B. Forecast sales level of Bonanza Corporation for 2013 through
exponential smoothing by using 0.5 and 0.7 weights for actual
values. And analyze which weight is more feasible for data