Forecasting Practice Problem PDF

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Practice Problems for MGMT 333...

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Forecasting Practice Problem Month January February March April May June July August September October November December

Sales ($ Millions) 20 24 27 31 37 47 53 62 54 36 32 29

a. Use a 3-month weighted moving average to forecast the sales for the months April through December. Use weights of (3/6), 2/6), and (1/6), giving more weight to more recent data. b. Use exponential smoothing with α = 0.6 to forecast the sales for the months April through December . Assume that the initial forecast for January was $22 million. Start error measurement in April. c. Compare the performance of the two methods by using the mean absolute deviation as the performance criterion, with error measurement beginning in April. Which method would you recommend?

4a. 3-month weighted moving average

April 24.82 = 25 May 28.49 = 28 June 33.32 = 33 July 40.98 = 41 August 48.3 = 48 September 56.48 = 56 October 56.47 = 56 November 46.36 = 46 December 37.06 = 37

4b. Exponential Smoothing alpha of .6 February 20.8 = 21 March 22.8 = 23 April 25.4 = 25 May 28.6 = 29 June 33.8 = 34 July 41.8 = 42 August 48.6 = 49 September 56.8 = 57 October 55.2 = 55 November 43.6 = 44 December 36.8 = 37

4c. Weighted moving average April 31 – 25 =6 May 37 – 28 =9 June 47 – 33 = 14 July 53 – 41 = 12 August 62 – 48 = 14 September 54 – 56 = -2 October 36 – 56 = -20 November 32 – 46 = -14 December 29 – 37 = -6 97

Exponential Smoothing April 31 – 25 =6 May 37 – 29 =8 June 47 – 34 = 13 July 53 – 42 = 11 August 62 – 49 = 13 September 54 – 57 = -3 October 36 – 55 = -19 November 32 – 44 = -12 December 29 – 37 = -8 93

97/9 = 10.78 MAD

93/9 = 10.33 MAD...