Problem 1 _ Word File

Problem 1 Question 1. Compute the forecast of the given sales projections (quarterly) using the following forecasting methods: a) 3-month moving average forecast. Year Quarte r Sales 3Month moving average forecast 1 1 144 2 151 3 134 4 151 143 2 1 145 145.3333333 2 145 143.3333333 3 141 147 4 166 143.6666667 3 1 151 150.6666667 2 164 152.6666667 3 151 160.3333333 4 176 155.3333333 4 1 170 163.6666667 2 180 165.6666667 3 156 175.3333333 4 187 168.6666667 5 1 166 174.3333333 2 182 169.6666667 3 154 178.3333333 4 169 167.3333333 The formula we used for 3Month moving average forecast = (Value 1 + Value 2 + Value 3) / 3

b) 5-month moving average forecast. Year Quarter Sales 5Month moving average forecast 1 1 144 2 151 3 134 4 151 2 1 145 2 145 145 3 141 145.2 4 166 143.2 3 1 151 149.6 2 164 149.6 3 151 153.4 4 176 154.6 4 1 170 161.6 2 180 162.4 3 156 168.2 4 187 166.6 5 1 166 173.8 2 182 171.8 3 154 174.2 4 169 169 The formula we used for 5Month moving average forecast= (Value 1+Value 2+Value 3+Value 4+Value5)/5

d) Exponential smoothing with an alpha weight of .75 Year Quarte r Sales Exponential smoothing with an alpha weight of .75 1 1 144 2 151 221.25 3 134 213.75 4 151 213.75 2 1 145 222 2 145 217.5 3 141 214.5 4 166 230.25 3 1 151 237.75 2 164 236.25 3 151 236.25 4 176 245.25 4 1 170 259.5 2 180 262.5 3 156 252 4 187 257.25 5 1 166 264.75 2 182 261 3 154 252 4 169 242.25 The formula we used for Exponential smoothing with an alpha weight of .75 = (0.75* Value 1 + 0.75 * Value 2)

Question 2. Compute the Mean Absolute Deviation/Error (MAD/MAE) for each forecasting method. Year Quarter Sales 3Month moving average forecast Absolute Error 1 1 144 2 151 3 134 4 151 143 8 2 1 145 145.3333333 0.33 2 145 143.3333333 1.67 3 141 147 6 4 166 143.6666667 22.33 3 1 151 150.6666667 0.33 2 164 152.6666667 11.33 3 151 160.3333333 9.33 4 176 155.3333333 20.67 4 1 170 163.6666667 6.33 2 180 165.6666667 14.33 3 156 175.3333333 19.33 4 187 168.6666667 18.33 5 1 166 174.3333333 8.33 2 182 169.6666667 12.33 3 154 178.3333333 24.33 4 169 167.3333333 1.67 10.88058824 Mean Absolute Deviation=Sum of Absolute deviation/Total number of observation Mean Absolute Deviation = 184.97/17 Mean Absolute Deviation = 10.88

Year Quarter Sales Weighted moving average forecast with the given weights 0.5, 0.3, and 0.2 Absolute Error 1 1 144 2 151 3 134 144.1 10.1 4 151 145.9 5.1 2 1 145 141.3 3.7 2 145 148 3 3 141 144.2 3.2 4 166 148 18 3 1 151 150.5 0.5 2 164 161.1 2.9 3 151 154.9 3.9 4 176 162.5 13.5 4 1 170 162.3 7.7 2 180 175 5 3 156 170.2 14.2 4 187 174.2 12.8 5 1 166 167.3 1.3 2 182 179.7 2.3 3 154 168.4 14.4 4 169 171 2 Mean Absolute Deviation 6.866666667 Mean Absolute Deviation=Sum of Absolute deviation/Total number of observation Mean Absolute Deviation = 123.6/18 Mean Absolute Deviation = 6.87 Year Quarte Sales Exponential smoothing with an alpha Absolute Error

r weight of .75 1 1 144 144 0 2 151 221.25 70.25 3 134 213.75 79.75 4 151 213.75 62.75 2 1 145 222 77 2 145 217.5 72.5 3 141 214.5 73.5 4 166 230.25 64.25 3 1 151 237.75 86.75 2 164 236.25 72.25 3 151 236.25 85.25 4 176 245.25 69.25 4 1 170 259.5 89.5 2 180 262.5 82.5 3 156 252 96 4 187 257.25 70.25 5 1 166 264.75 98.75 2 182 261 79 3 154 252 98 4 169 242.25 73.25 Mean Absolute Deviation 75.0375 Mean Absolute Deviation=Sum of Absolute deviation/Total number of observation Mean Absolute Deviation = 1500.75/20 Mean Absolute Deviation = 75.03 Question 3. Which is the better forecast method?