# Study Guide for Blockhesd Concrete

The spreadsheet Foundation
Blocks uses** seasonal decompoditiom time series**
to forecast Blockhead Concrete Company sales of concrete blocks
designed for building foundations in the same way Rocky Gold used
seasonal decompoditiom
time series to forecast jewelry sales. The purpose of the
forecast is to help Blockhead decide how much inventory to produce and
stock. The details are in the link Review
Seasonal
Time Series.

The sppreadsheet Landscape
Blocks is mainly concerned with forecasting sales of concrete
blocks designed for use in landscaping. While builders have to
buy foundation blocks very early in the building process, they buy
landscape blocks only when they are nearly done.

Tab "Seasonal" of spreadsheet Landscape
Blocks uses the by-now-familiar **seasonal decompoditiom time
series** method
to forecast sales of landscape blocks. Note that
the MSE is 330,573.

Tab "Leading" of spreadsheet Landscape
Blocks uses Housing Starts as a** leading indicator** to
forecast sales
of landscape blocks. See page 1 of the text for a discussion of
leadind indicators. An indicator (or "Causal") model is a
regression model where X is the indicator variable used to forecast the
following month'svalue of the variable Y you're interested in. In
a "leading indicator model, past or present values of X are used to
forecast future values of Y. In the example in the tab "Leading,"
the number of housing starts this month is used to forecast the number
of landscape blocks needed next month as the houses begun this month
near completion. The MSE is 262,121, indicating better
performance thab the time series model; this is not surprising because
the jeading indicator model incorporates more information.

Tab "Simultaneoua" of spreadsheet Landscape
Blocks uses Housing Starts as a
**simultaneous indicator** to forecast sales of foundation blocks
in the samr month as the housing starts. The MSE is 233,208 which
is worse than the MSE of 136,730 for seasonal decompoditiom time series
from the
spreadsheet Foundation
Blocks, but even if the Msefor the simultaneous
indicator were much better it would be
useless for Blockhead's inventory management becauae the Census Bureau
doesn't publish the Housing Starts data until after the end of the
month.

We have already looked at a more useful example of a simultaneous
indicator model, model 2 in Pie
Processing
Cost; see pages 40-42 of the textbook. Since the
number of pies he's going to bake in the coming week is Mr. Simon"s own
decision, he knows it ahead of time and can use it to forecast his
processing cost for that same week.

For exams, you will have to read Excel output like lines 83-100 tab
"Simultaneous" of spreadsheet Landscape
Blocks
and pick out the slope and intercept of the indicator model. In
the example, the slope is 0.098 thousand additional foundation blocks
per housing start and the intercept is 228.781 thousand landscape
blocks. You will also have to "plug in" a specified value of the
X variable ti firecast the corresponding value of the Y variable; for
example, if there are 20,000 housing starts in a oarticular
month we would expect 228.781 +
0.098*20,000 = 2,192.337 thousand landscape blocks to be demanded that
same month.