Amped Inc produces and sells a consumer product. To better understand its operations, Amped collects 60 months of sales and inventory data (January 2016 to December 2020) for analysis.
The sales data are the total selling price (in $) of finished goods transacted in a month, and the inventory data are the average on-hand inventory (in units) in a month. Data are included in an Excel spreadsheet.
(a) Analyse the sales and inventory data. Provide a visualization and a numerical description of the two variables according to the following requirements:
(i) Select an appropriate chart type to visualize and present data. Provide a brief justification of your choice. What observations and conclusions can you make from the data visualization?
(ii) Present descriptive statistics of the two variables. Provide a brief explanation of the key statistics. What can you observe and conclude from the descriptive statistics? Are these observations and conclusions consistent with those from (a)(i)?
(b) Inventory is a critical asset in a consumer product company. The role of inventory is to support the company’s operations and absorb variability. Amped’s management team wants to find out if the company’s inventory drives the firm’s sales. You are tasked to perform an association analysis according to the following requirements.
(i) Use an appropriate chart type to examine the relationship between the two
variables. Provide a brief justification of your choice. What can you observe and conclude from the chart?
(ii) Use an appropriate statistical tool to examine the relationship between the two variables. Clearly present the steps and components of the tool (if any), as well as the result of the analysis. What can be concluded from the analysis? Is the conclusion consistent with the observations and conclusions in (b)(i)?
(iii) Is it possible to establish causality between inventory and sales, i.e., inventory drives the firm’s sales performance, based on the conclusions from (b)(i) and (b)(ii)? Why or why not?