2. A golf club owner has received this year’s price list from Green Golf Supply. Their top golf ball, the Champion, sells for £40.00 per box with dozen balls, but may be obtained at a discounted price if purchased in quantity. The price quotes are:
The golf club owner expects demand this year to be 2000 boxes. The club incurs a fixed order placement of £40 each time an order is placed with Green Golf Supply, regardless to order quantity. An annual holding cost is estimated to be 20 percent of inventory value. What is the most cost effective inventory policy to apply in this case?
(a) Use the demand data obtained in years 2012 and 2013 to determine the initial estimates of base, trend and all seasonal factors. Explain how you calculated the initial estimates.
(b) Use the Holt-Winter’s trend and seasonality method to forecast monthly demand in 2014 and to forecast demand in January 2015. Assume that smoothing constants for level, trend and seasonality are = 0.1, =0.2 and = 0.3, respectively.
Explain how you calculated the forecasts and which formulae you used.
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