Case 20.1 Citizens Gas

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ANSWER KEY: Case 20.1 Adapted from the CMA Exam. 1. The criteria which must be considered in specifying the basic structure and features of Citizens' Gas Company's new system to assist in planning its natural gas needs include the following: • Need for market information The factors which affect the demand and supply for gas must be isolated, their relative importance determined, and their effect quantified. • Need for accuracy The accuracy requirement of the system determines the required level of detail, quality of the input data, and sophistication of the system logic. While the system must be designed to provide accuracy which matches the need, care must be taken to ensure that excessive effort is not spent in being overly accurate in specific areas when the overall accuracy is inherently less due to the planning environment. • Frequency of use The frequency of use of the system provides direction as to the level of mechanization. If the system will be used only once each month to project the effect of the most recent actual data, it may be sufficient to develop a system which is a combination of mechanized and manual procedures. If it is likely that a variety of alternatives will be evaluated each month, a fully mechanized system will be more desirable. • Turnaround required The need for timely reporting at month end will also provide guidance as to the degree of mechanization and the level of complexity that will be appropriate. Because the system is to be used for both multi-year planning and monthly tactical planning, the system should be designed to provide for quick turnaround of results at month end. Accordingly, consideration must be given to minimizing the data input requirements. • Cost/benefit analysis The new system should be able to provide the quality of information so that its

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