ITOM 6222 Quiz 1 Online PDF

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ITOM 6222: Business Forecasting

Professor Tom Tan

ITOM 6222 Quiz 1 (Moving Average and Exponential Smoothing) 48094180 SMU ID: _________________,

Andre Abhinav Prasad Student Name: _______________ (Print)

722 Section Number: ________________

Please show work for all quantitative questions. No points will be given if there is no work. Question 1: Mario Land’s unemployment rate as a percentage of civilian labor force in 2017 is shown below.

2017

Quarter 1 2 3 4

Unemployment Rate (Y) 5.4 5.3 5.3 5.6

a) Estimate unemployment in the first quarter of 2018 using the naïve approach. (1 point) Ans. Since in naive approach we use previous period to forecast the next, therefore unemployment in 1st quarter of 2018 is same as unemployment in 4th quarter of 2017 which is 5.6.

b) Estimate unemployment in the first quarter of 2018 using the moving average approach with k = 3. (1 point) Ans. The unemployment in the first quarter of 2018 using moving average approach with k=3 is simply the average of three periods prior to it i.e. ( 5.3 +5.3 +5.6)/3 = 5.4 .

c) Estimate the unemployment in the first quarter of 2018 using single exponential smoothing method with α =0.7. Initialize the model with Yˆ1 = Y1 . (2 points) 5.51 , calculated Ans. The unemployment in 1st quarter of 2018 by single exponential method with alpha=0.7 is ^ using the formula Y t+1 = alpha * Yt + (1- alpha ) Yt i.e Y t+1 = 0.7* 5.6 + (1-0.7 )* 5.31 = 5.51 . ( 5.31 is the value for 2017 4th quarter which was also calculated using the same formula recursively ).

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ITOM 6222: Business Forecasting

Professor Tom Tan

Question 2: Imagine it is month 12 in year 2 now. We have past two years of sales data, and have decided to apply Winter’s Multiplicative Method to forecast the following monthly sales data. The seasonal period is s = 12.

a) What are the Excel functions in Cells G28, H28, I28, respectively? You do not need to calculate the values. (2 points) Ans. G28 = $G$3 *D28/I16 + (1-$G$3)*(G27+H27) H28 = $H$3 *(G28- G27) + (1- $H$3)* H27 I28 = $I$3*(D28/G28) +(1- $I$3)*I16

b) Suppose we want to forecast the sales of Month 1 in Year 3. What Excel function should go into Cell F29? You do not need to calculate the values. (1 points). Ans.

F29 = (G28+H28)*I16

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ITOM 6222: Business Forecasting

Professor Tom Tan

c) What would you type in Cell J30 to compute MSE? (1 point) Ans. We would use Solver to compute MSE under the constraints that the parameters should be between 0 and 1.

d) We use Solver to optimize the weight parameters. The parameters should be between 0 and 1. Which cell(s) should be in the blank after “Set Objective:”? (1 point) Ans. $J$30

e) Which cell(s) should be in the blank after “By Changing Variable Cells”? (1 point) Ans. $G$3:$I$3

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