Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 28

For homework Problem in Chapter, the Tech power plant wants to keep a 7- to 10-day supply of coal on hand at all times. It takes 3 days to transport coal by railroad from the coalfields, and the cost of shipping and handling coal by rail is $19.50 per ton. Using the linear trend line forecast for coal consumption at the Tech power plant for the coming year from Problem in Chapter, and if the annual handling and storage cost at the Tech power plant is $47 per ton, determine the power plant's ordering policy and total annual inventory cost.
Problem
The Tech power plant burns coal and natural gas to generate steam and electricity for all campus buildings. The annual coal consumption at the plant has increased annually for the past 8 years due to an aggressive campus building program. The following table shows the annual coal consumption and the building space increases on campus for this period.
a. Develop a linear trend model to forecast coal consumption for the coming year.
b. Develop a linear regression model to forecast coal consumption at the plant given the annual space increases and forecast coal consumption next year for the planned opening of 94,000 ft 2 additional building space. Which forecast model do you think Tech should rely on