Short Questions and Multiple Choices

1. Given an actual demand of 60 for a period when

forecast of 70 was anticipated, and an alpha of 0.3, what
would the forecast for the next period be using simple
exponential smoothing?
F = (1-0.3)(70)+0.3(60) = 67
2. Suppose you have been asked to generate a demand
forecast for a product for year 2012 using an exponential
smoothing method. The forecast demand in 2011 was
910. The actual demand in 2011 was 850. Using this data
and a smoothing constant of 0.3, which of the following is
the demand forecast for year 2012?
A) 850
B) 885
C) 892
D) 925

F = (1-0.3)(910)+0.3(850) =
892

Short Questions and Multiple Choices

3. The president of State University wants to forecast
student enrollments for this academic year based on the
following historical data: 5 years ago ; 15,000, 4 years
ago ; 16,000, 3 years ago; 18,000, 2 years ago; 20,000,
Last year; 21,000. What is the forecast for this year using
exponential smoothing with = 0.4, if the forecast for
two
years
t
1 ago was216,000? 3
4
5
At 15000
16000 18000 20000 21000
Ft
16000
17600
Forecast for last year
F5 = (1-)F4+ (A4)
F5 = 0.6(16000)+0.4(20000)=17600
Forecast for this year
F6 = (1-)F5+ (A5)
F6 = 0.6(17600)+0.4(21000)=18960

Short Questions and Multiple Choices

4. Use exponential smoothing to forecast this periods
demand if = 0.2, previous actual demand was 30, and
previous forecast was 35.
A) 29
B) 31
C) 34
D) 36
E) 37

F = (1-0.2)(35)+0.2(30) = 34

5. Exponential smoothing is being used to forecast

demand. The previous forecast of 66 turned out to
be 5 units larger than actual demand. The next
forecast is 65. Compute ?
F(t+1) = Ft + (At-Ft)
65

66

+5
-5

65 = 66 + (-5)

5=1

Short Questions and Multiple Choices

6. A forecast based on the previous forecast plus a
percentage of the forecast error is:
A) a naive forecast
B) a simple moving average forecast
Ft+1 = (1-)Ft+
C) a centered moving average forecast
(A
D) an exponentially smoothed forecast
Ft+1
=t)Ft+ (At-Ft
E) an associative forecast
)

7. In exponential smoothing forecasting, using large

values of the smoothing coefficient generates
forecasts that are more:
A) accurate
B) responsive
Ft+1 = (1-)Ft+
C) random
(At)
D) stable
E) level

Short Questions and Multiple Choices

8. For what value of , exponential smoothing becomes
nave method?
Ft+1 = (1-)Ft+
A) =0
(A
B) =0.25
Ft+1
=t)
C) =0.5
(A=
t) (1-1)F +
F
t+1
t
D) =0.75
1(At)
E) =1
9. For what value of , exponential smoothing
becomes a straight line?
Ft+1 = (1-)Ft+
A) =0
(A
B) =0.25
Ft+1
=t)
Ft
C) =0.5
Ft+1 = (1-0)Ft+
D) =0.75
0(At)
E) =1

Problem 1
Given the following demand data
Month
Feb Mar Apr May Jun
Demand 19 18 15 20 18 22 20

Jul Aug

a) Draw the data.

b) Forecast for September using Five period moving
average.
c) Forecast for September using Exponential smoothing.
Alpha is 0.2 and forecast for march was 19.
d) Forecast for September using Nave method
e) Compute MAD for Nave Method and Exponential
Smoothing. Which one is preferred? Nave Method and
Exponential Smoothing?
f) Forecast for September using Linear Regression

(a) Plot the Data

( b) Forecast for Sep Using 5 Period Moving Average

F8 =MA7= (A7+A6+A5+A4+A3)/5 = (20+22+18+20+15)/5

F8 =MA7= 19

(b) Forecast Using 5 Period Moving Average for All Periods

(c)Forecast for Sep Using Exponential Smoothing =0.2 and F(Mar) = 19

March is period 2

F3 = (1-)F2 + A2
F3 = (0.8)19+ 0.2(18)
F3 = 18.8

(c) Forecast for Sep Using =.2 and F(Mar) = 19

Using the same formula, we compute F4, F5, F6, F7, and
finally F8 which is the demand for Sep.

(d) Forecast for Sep Using Nave Method

F(t +1) =At

F8 =A7

F8 = 20

Forecast for all periods using Nave Method

(e) Which Technique ?

When comparing several methods, we need to use the
same time horizon for all methods. We need to have
actual as well as forecasts for all methods for all periods
of MAD computations
Here we have Actual for periods 1 to 7; that is 7
periods.
Regression can provide us with forecast for periods 1 to

Five period moving average can only provide forecast

for periods 6 and 7; that is 2 periods
Therefore, to compare all these methods, we can
compute MAD only over 2 periods. But two period is not
enough.
Nave Method or Exponential Smoothing ?
Nave method forecasts for periods 2 to 7; That is 6

(e) Nave Method or Exponential Smoothing ?

Better
However, we need to keep all methods, because we need
more actual data. A MAD computed just 6 periods is not
a reliable measure.
It is better to have all methods for say 10-20 more
periods, and then identify the best method

Short Questions and Multiple Choices

For what value of alpha the forecast for the next period is
equal to 90% of the actual of this period.
A) 0.9
B) 0.1
C) 0.5
D) all of the above
E) we do not know
The larger the , the larger the number of periods in the
moving average. True or false? Why?
False
Age of data = 1/
= 0.5 age of data is 2 periods.
= 0.2 age of data is 5 periods.
= 0.1 age of data is 10 periods.

Short Questions and Multiple Choices

Given the following demand
Suppose the forecast for period 2 is equal to the actual for
period 1. What is your forecast for period 4 using
Period
Deman
exponential smoothing and =0.5?
d
A) 300
B) 400
C) 500
D) 550
E) none of the above

Ft+1 = (1-)Ft+ (At)

Ft+1 = (1-0.5)Ft+ 0.5(At)
Ft+1 = (1/2) Ft+ (1/2) (At)
Ft+1 = (Ft+At)/2
F3 = (F2+A2)/2
F3 = (300+500)/2= 400

1
2
3

300
500
600

Short Questions and Multiple Choices

Given a forecast using a 6 period moving average. What
is the average age of data?
The last piece (newest piece) of data is only 1 period old.
The first piece (oldest piece) of data in a 6 period moving
average is 6 periods old.
The average age of data is (1+6)/2 = 3.5
If the age of data in exponential smoothing is 1/ , for
what value of , exponential smoothing performs close to
a six period moving average?
The age of data in a 6 period moving average is 3.5.
The age of data in exponential smoothing is 1/ .
1/ = 3.5
= 1/3.5
= 0.29