FORECASTING PROBLEMS

PROBLEM 1

Auto sales at Carmens Chevrolet are shown below. Develop a 3-week moving average.
Week

Auto Sales

10

11

10

13

PROBLEM 2

Carmens decides to forecast auto sales by weighting the three weeks as follows:
Weights
Applied

Period

Last week

Two weeks ago

Three weeks ago

Total

PROBLEM 3

A firm uses simple exponential smoothing with 0.1 to forecast demand. The forecast
for the week of January 1 was 500 units whereas the actual demand turned out to be 450
units. Calculate the demand forecast for the week of January 8.
PROBLEM 4

Exponential smoothing is used to forecast automobile battery sales. Two value of are
examined, 0.8 and 0.5. Evaluate the accuracy of each smoothing constant. Which
is preferable? (Assume the forecast for January was 22 batteries.) 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 10,000
portable water pumps. The average quarterly sales for the past 5 years have averaged:
spring 4,000, summer 3,000, fall 2,000 and winter 1,000. Compute the quarterly index.
PROBLEM 6

Using the data in Problem 5, Meredith and Smunt Manufacturing expects sales of pumps
to grow by 10% next year. Compute next years sales and the sales for each quarter.

ANSWERS
Solution 1:
Moving average =

demand in previous n periods

n

Week

Auto
Sales

Three-Week Moving Average

10

11

(8 + 9 + 10) / 3 = 9

10

(10 + 9 + 11) / 3 = 10

13

(9 + 11 + 10) / 3 = 10

(11 + 10 + 13) / 3 = 11 1/3

Solution 2:
Weighted moving average =

(weight for period n)(demand in period n)

weights

Week

Auto
Sales

Three-Week Moving Average

10

11

[(3*9) + (2*10) + (1*8)] / 6 = 9 1/6

10

[(3*11) + (2*9) + (1*10)] / 6 = 10 1/6

13

[(3*10) + (2*11) + (1*9)] / 6 = 10 1/6

[(3*13) + (2*10) + (1*11)] / 6 = 11 2/3

Solution 3:
Ft Ft 1 ( A t 1 Ft 1 ) 500 0.1( 450 500) 495 units

Solution 4:
Month

Actual
Rounded
Battery Sales Forecast
with a =0.8

Absolute
Deviation
with a =0.8

Rounded
Forecast
with a =0.5

Absolute
Deviation
with a =0.5

January

20

22

22

February

21

20

21

March

15

21

21

April

14

16

18

May

13

14

16

June

16

13

14.5

1.5

SE

S = 15

S = 16

2.56

2.95

3.5

3.9

On the basis of this analysis, a smoothing constant of a = 0.8 is preferred to that of a

= 0.5 because it has a smaller MAD.
Solution 5:
Sales of 10,000 units annually divided equally over the 4 seasons is 10,000 / 4 2,500
and the seasonal index for each quarter is: spring 4,000 / 2,500 1.6; summer
3,000 / 2,500 1.2; fall 2,000 / 2,500 .8; winter 1,000 / 2,500 .4.

Solution 6:
. 11,000). Sales for each quarter
Next years sales should be 11,000 pumps (10,000 * 110
should be 1/4 of the annual sales * the quarterly index.
Spring = (11,000 / 4) *1.6 = 4,400;

Summer = (11,000 / 4) *1.2 = 3,300;

Fall = (11,000 / 4) *.8 = 2,200;

Winter = (11,000 / 4) *.4.= 1,100.