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Month 1 2 3 7 8 9 10 11 12 Flat-Screen Sales 30 32 30 39 33 34 34 38 36 39 30 36 a) Determine the one-step-ahead flat-screen sales forecasts for the first month of next year using 3- and 5-month moving averages. b) Using a 5-month moving average, determine the one-step-ahead flat-screen forecasts for the 7th through 12th months. Compute the MAD. c) Suppose that exponential smoothing is used with a smoothing constant alpha = 0.1 to forecast flat-screen sales for the 7th through 12th months. d) Based on MAD which method did better? 4.

Month 1 2 3 7 8 9 10 11 12 Flat-Screen Sales 30 32 30 39 33 34 34 38 36 39 30 36 a) Determine the one-step-ahead flat-screen sales forecasts for the first month of next year using 3- and 5-month moving averages. b) Using a 5-month moving average, determine the one-step-ahead flat-screen forecasts for the 7th through 12th months. Compute the MAD. c) Suppose that exponential smoothing is used with a smoothing constant alpha = 0.1 to forecast flat-screen sales for the 7th through 12th months. d) Based on MAD which method did better? 4.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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### Flat-Screen Sales Forecasting **Monthly Sales Data:** | Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | |------------------|----|----|----|----|----|----|----|----|----|----|----|----| | Flat-Screen Sales| 30 | 32 | 30 | 39 | 33 | 34 | 34 | 38 | 36 | 39 | 30 | 36 | **Questions:** a) **Forecasting with Moving Averages:** - Determine the one-step-ahead flat-screen sales forecasts for the first month of next year using both 3-month and 5-month moving averages. b) **5-Month Moving Average & MAD Calculation:** - Using a 5-month moving average, determine the one-step-ahead flat-screen sales forecasts for the 7th through 12th months. - Compute the Mean Absolute Deviation (MAD). c) **Exponential Smoothing:** - Assume exponential smoothing is used with a smoothing constant (alpha) of 0.1. - Forecast flat-screen sales for the 7th through 12th months. d) **Comparison Based on MAD:** - Based on the MAD, determine which forecasting method performed better. **Explanation:** 1. **Moving Averages:** - **3-Month Average:** Calculate the average of the sales data over a 3-month period and use it to predict the next month’s sales. - **5-Month Average:** Similarly, use a 5-month data span for predictions. 2. **Exponential Smoothing:** - A weighted average method where recent observations have more influence than older ones. - The smoothing constant (α) dictates the weight: smaller α means more smoothing. 3. **MAD (Mean Absolute Deviation):** - A measurement of forecast accuracy, calculated as the average of absolute differences between actual and forecasted values. This exercise demonstrates how different forecasting methods can be applied to time series data and how their effectiveness can be compared using MAD.
Transcribed Image Text:### Flat-Screen Sales Forecasting **Monthly Sales Data:** | Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | |------------------|----|----|----|----|----|----|----|----|----|----|----|----| | Flat-Screen Sales| 30 | 32 | 30 | 39 | 33 | 34 | 34 | 38 | 36 | 39 | 30 | 36 | **Questions:** a) **Forecasting with Moving Averages:** - Determine the one-step-ahead flat-screen sales forecasts for the first month of next year using both 3-month and 5-month moving averages. b) **5-Month Moving Average & MAD Calculation:** - Using a 5-month moving average, determine the one-step-ahead flat-screen sales forecasts for the 7th through 12th months. - Compute the Mean Absolute Deviation (MAD). c) **Exponential Smoothing:** - Assume exponential smoothing is used with a smoothing constant (alpha) of 0.1. - Forecast flat-screen sales for the 7th through 12th months. d) **Comparison Based on MAD:** - Based on the MAD, determine which forecasting method performed better. **Explanation:** 1. **Moving Averages:** - **3-Month Average:** Calculate the average of the sales data over a 3-month period and use it to predict the next month’s sales. - **5-Month Average:** Similarly, use a 5-month data span for predictions. 2. **Exponential Smoothing:** - A weighted average method where recent observations have more influence than older ones. - The smoothing constant (α) dictates the weight: smaller α means more smoothing. 3. **MAD (Mean Absolute Deviation):** - A measurement of forecast accuracy, calculated as the average of absolute differences between actual and forecasted values. This exercise demonstrates how different forecasting methods can be applied to time series data and how their effectiveness can be compared using MAD.
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