You are on page 1of 7

Practice Problems: Chapter 4, Forecasting

Problem 1:
Auto sales at Carmen’s Chevrolet are shown below. Develop a 3-week moving average.
Week

Auto
Sales

1

8

2

10

3

9

4

11

5

10

6

13

7

-

Problem 2:
Carmen’s decides to forecast auto sales by weighting the three weeks as follows:
Weights
Applied

Period

3

Last week

2

Twoweeks
ago

1

Three weeks
ago

6

Total

1

000.000 and winter 1.Problem 3: A firm uses simple exponential smoothing with   0. Compute the quarterly index.1 to forecast demand. Evaluate the accuracy of each smoothing constant.   0. Problem 4: Exponential smoothing is used to forecast automobile battery sales.5. fall 2. Meredith and Smunt Manufacturing expects sales of pumps to grow by 10% next year. Calculate the demand forecast for the week of January 8. Which is preferable? (Assume the forecast for January was 22 batteries. Problem: 6 Using the data in Problem 5. summer 3.) Actual sales are given below: Month Actual Forecast Battery Sales January 20 22 February 21 March 15 April 14 May 13 June 16 Problem: 5 Over the past year Meredith and Smunt Manufacturing had annual sales of 10. Compute next year’s sales and the sales for each quarter.000.000. 2 . Two value of  are examined. The average quarterly sales for the past 5 years have averaged: spring 4.000 portable water pumps.8 and   0. The forecast for the week of January 1 was 500 units whereas the actual demand turned out to be 450 units.

3 .

ANSWERS: Problem 1: Moving average =  demand in previous n periods Three-Week Average n Week Auto Sales Moving 1 8 2 10 3 9 4 11 (8 + 9 + 10) / 3 = 9 5 10 (10 + 9 + 11) / 3 = 10 6 13 (9 + 11 + 10) / 3 = 10 7 - (11 + 10 + 13) / 3 = 11 1/3 4 .

1( 450  500)  495 units 5 .Problem 2: Weighted moving average =  (weight for period n)(demand in period n)  weights Week Auto Sales Three-Week Moving Average 1 8 2 10 3 9 4 11 [(3*9) + (2*10) + (1*8)] / 6 = 9 1/6 5 10 [(3*11) + (2*9) + (1*10)] / 6 = 10 1/6 6 13 [(3*10) + (2*11) + (1*9)] / 6 = 10 1/6 7 - [(3*13) + (2*10) + (1*11)] / 6 = 11 2/3 Problem 3: Ft  Ft 1   ( A t 1  Ft 1 )  500  0.

5 SE S = 15 S = 16 2. fall 2.Problem 4: Month Actual Rounded Battery Sales Forecast with a =0.000 / 2.95 3.500  1. a smoothing constant of a = 0.5 3.56 2.5 Absolute Deviation with a =0. winter 1.9 On the basis of this analysis. summer 3.6.500 . Problem 5: Sales of 10.5 because it has a smaller MAD.4.8 is preferred to that of a = 0.2.000 / 2.000 / 2.000 / 4  2.000 units annually divided equally over the 4 seasons is 10.500 .8 Absolute Deviation with a =0. 6 .5 1.8.8 Rounded Forecast with a =0.500  1.500 and the seasonal index for each quarter is: spring 4.5 January 20 22 2 22 2 February 21 20 1 21 0 March 15 21 6 21 6 April 14 16 2 18 4 May 13 14 1 16 3 June 16 13 3 14.000 / 2.

4. Fall = (11.000 pumps (10. 7 .000 / 4) *1.6 = 4.100.300.2 = 3.200.8 = 2.000 / 4) *. Winter = (11.000 / 4) *. Spring = (11. Sales for each quarter Next years sales should be 11.000 * 110 should be 1/4 of the annual sales * the quarterly index.= 1.Problem 6: .000).  11. Summer = (11.000 / 4) *1.400.