Portfolio project
Forecasting refers to the function of making estimates of products and service that consumers are likely to purchase/ use so as to gauge if the company is liable to make profits. There are different forecasting methods used depending on the company and the type of product and services- whether fixed or variable. Red velvet cookies can be estimated to cost $ 7 per ounce this estimate cost is based on the average price for different manufacturing companies.
Using Economic Order Quantity (EOQ) system the company forecasting cost can be calculated.. Before the company makes this calculations it is important to considered the total fixed cost and the variable cost that will be incurred in production and marketing of the red velvet cookies. The estimated cost can be estimated as shown in the table below. The results on the table are based on the average costs that have been incurred on the past few months say the last subsequent five months.
The total variable cost for this company is $ 3900. If this velvet cookies manufacturing company produces an estimate total of 800 cookies in a day then the total cookies produced in a month totals to 24000 cookies. The unit variable cost for the company’s production of a single cookie should be estimated to be the outcome from dividing the total variable cost with the production volume. In this case the forecasting cost of the red velvet cookie should be 24000 divided by 3900 which equals $6.2.
