Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Textbook Question
Chapter 2, Problem 38P
Suppose you are borrowing $25,000 and making monthly payments with 1% interest. Show that the monthly payments should equal $556.11. The key relationships are that for any month t
(Ending month t balance) = (Ending month t − 1 balance) − ((Monthly payment) − (Month t interest))
(Month t interest) = (Beginning month t balance) × (Monthly interest rate)
Of course, the ending month 60 balance must equal 0.
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Scenario
You have been given a task to create a demand forecast for the second year of sales of a premium outdoor grill.
Accurate forecasts are important for many reasons, including for the company to ensure they have the materials
they need to create the products required in a certain period of time. Your objective is to minimize the forecast
error, which will be measured using the Mean Absolute Percentage Error (MAPE) with a goal of being below 25%.
You have historical monthly sales data for the past year and access to software that provides forecasts based on
five different forecasting techniques (Naïve, 3-Month Moving Average, Exponential Smoothing for .2, Exponential
Smooth for .5, and Seasonal) to help determine the best forecast for that particular month. Based on the given
data, you will identify trends and patterns to create a more accurate forecast.
Approach
Consider the previous month's forecast to identify which technique is most effective. Use that to forecast the next…
Approach
Consider the previous month's forecast to identify which technique is most effective. Use that to forecast the next
month.
Remember to select the forecasting technique that produces the forecast error nearest to zero. For example:
a. Naïve Forecast is 230 and the Forecast Error is -15.
b. 3-Month Moving Forecast is 290 and the Forecast Error is -75.
c. Exponential Smoothing Forecast for .2 is 308 and the Forecast Error is -93.
d. Exponential Smoothing Forecast for .5 is 279 and the Forecast Error is -64.
e. Seasonal Forecast is 297 and the Forecast Error is -82.
The forecast for the next month would be 230 as the Naïve Forecast had the Forecast Error closest to zero with a
-15. This forecasting technique was the best performing technique for that month. You do not need to do any
external analysis-the forecast error for each strategy is already calculated for you in the tables below.
Naïve
Month Period
Actual
Demand
Naïve Forecast
Error
3-
Month
Moving
Forecast
3-
Month
Moving…
Scenario
You have been given a task to create a demand forecast for the second year of sales of a premium outdoor grill.
Accurate forecasts are important for many reasons, including for the company to ensure they have the materials
they need to create the products required in a certain period of time. Your objective is to minimize the forecast
error, which will be measured using the Mean Absolute Percentage Error (MAPE) with a goal of being below 25%.
You have historical monthly sales data for the past year and access to software that provides forecasts based on
five different forecasting techniques (Naïve, 3-Month Moving Average, Exponential Smoothing for .2, Exponential
Smooth for .5, and Seasonal) to help determine the best forecast for that particular month. Based on the given
data, you will identify trends and patterns to create a more accurate forecast.
Approach
Consider the previous month's forecast to identify which technique is most effective. Use that to forecast the next…
Chapter 2 Solutions
Practical Management Science
Ch. 2.4 - Prob. 1PCh. 2.4 - Prob. 2PCh. 2.4 - Prob. 3PCh. 2.4 - Prob. 4PCh. 2.5 - Prob. 5PCh. 2.5 - Prob. 6PCh. 2.5 - Prob. 7PCh. 2.5 - Prob. 8PCh. 2.5 - Prob. 9PCh. 2.6 - Prob. 10P
Ch. 2.6 - Prob. 11PCh. 2.6 - Prob. 12PCh. 2.6 - Prob. 13PCh. 2.7 - Prob. 14PCh. 2.7 - Prob. 15PCh. 2.7 - Prob. 16PCh. 2.7 - Prob. 17PCh. 2.7 - Prob. 18PCh. 2.7 - Prob. 19PCh. 2 - Julie James is opening a lemonade stand. She...Ch. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - The file P02_26.xlsx lists sales (in millions of...Ch. 2 - Prob. 27PCh. 2 - The file P02_28.xlsx gives the annual sales for...Ch. 2 - Prob. 29PCh. 2 - A company manufacturers a product in the United...Ch. 2 - Prob. 31PCh. 2 - Prob. 32PCh. 2 - Assume the demand for a companys drug Wozac during...Ch. 2 - Prob. 34PCh. 2 - Prob. 35PCh. 2 - Prob. 36PCh. 2 - Prob. 37PCh. 2 - Suppose you are borrowing 25,000 and making...Ch. 2 - You are thinking of starting Peaco, which will...Ch. 2 - Prob. 40PCh. 2 - The file P02_41.xlsx contains the cumulative...Ch. 2 - Prob. 42PCh. 2 - Prob. 43PCh. 2 - The IRR is the discount rate r that makes a...Ch. 2 - A project does not necessarily have a unique IRR....Ch. 2 - Prob. 46PCh. 2 - Prob. 1CCh. 2 - The eTech Company is a fairly recent entry in the...
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