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Practice Problems: Chapter 4, Forecasting: Problem 1
Practice Problems: Chapter 4, Forecasting: Problem 1
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 Period
Applied
3 Last week
2 Twoweeks
ago
1 Three weeks
ago
6 Total
1
Problem 3:
A firm uses simple exponential smoothing with α = 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 α are
examined, α = 0.8 and α = 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:
January 20 22
February 21
March 15
April 14
May 13
June 16
2
Problem 5:
Use the sales data given below to determine: (a) the least squares trend line, and (b) the predicted value for
2008 sales.
Year Sales
(Units)
2001 100
2002 110
2003 122
2004 130
2005 139
2006 152
2007 164
3
Problem 6:
Given the forecast demand and actual demand for 10-foot fishing boats, compute the tracking signal and
MAD.
1 78 71
2 75 80
3 83 101
4 84 84
5 88 60
6 85 73
Problem: 7
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: 8
Using the data in Problem 7, Meredith and Smunt Manufacturing expects sales of pumps
to grow by 10% next year. Compute next year’s sales and the sales for each quarter.
4
ANSWERS:
Problem 1:
Moving average =
α demand in previous n periods
n
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
5
Problem 2:
1 8
2 10
3 9
Problem 3:
Ft = Ft α1 + α ( A t α1 α Ft α1 ) = 500 + 0.1( 450 α 500) = 495 units
6
Problem 4:
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 15 1
Sum = 15 16
2.5 2.75
SE 3.7 4.1
7
Problem 5:
S X = S Y S S XY
2
28 =917 X =140 =
3961
x=
α x = 28 = 4
n 7
y=
α y = 917 = 131
n 7
b=
α xy α nxy = 3961 α (7)(4)(131) = 293 = 10.46
α x α nx
2 2 2
140 α ( 7)( 4 ) 28
a = y α bx = 131 α (10.46 × 4) = 89.16
Therefore, the least squares trend equation is:
y$= a + bx = 89.16 + 10.46 x
To project demand in 2008, we denote the year 2008 as x = 8, and:
Sales in 2008 = 89.16 + 10.46 * 8 = 172.84
8
Problem 6:
1 78 71 -7 -7
2 75 80 5 -2
3 83 101 18 16
4 84 84 0 16
5 88 60 -28 -12
6 85 73 -12 -24
MAD =
Forecast errors =
70
= 11.7
n 6
1 78 71 7 7 7.0 -1.0
2 75 80 5 12 6.0 -0.3
4 84 84 0 30 7.5 +2.1
5 88 60 28 58 11.6 -1.0
6 85 73 12 70 11.7 -2.1
RFSE 24
Tracking Signal = = = 2.1 MADs
MAD 11.7
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Problem 7:
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.
Problem 8:
Next years sales should be 11,000 pumps (10,000 * 110. = 11,000). Sales for each quarter
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.
10