Wollo University

KIOT
Department of industrial Engineering
Worksheet on forecasting
① Given the following data, calculate forecasts for months 4, 5, 6, and 7 using a
three-month moving average and an exponential smoothing forecast with an alpha of 0.3.
Assume a forecast of 61 for month 3: draw the graph of actual, moving average and an
exponential smoothing forecast.

② A company is comparing the accuracy of two different forecasting methods. Use

MAD to compare the accuracies of these methods for the past five weeks of sales. Which
method provides greater forecast accuracy?
Method A Method B

weeks Actual sales Forecast Forecast

1 25 30 30
2 18 20 16
3 26 23 25
4 28 29 30
5 30 25 28

③ Hospitality Hotels forecasts monthly labour needs.

 Based on the data given above, calculate all of the following.
(a) Given the following monthly labour figures, make a forecast for June using a three-
period moving average and a five-period moving average.
(b) What would be the forecast for June using the naïve method?
(c) If the actual labour figure for June turns out to be 41, what would be the forecast for
July using each of these models?
(d) Compare the accuracy of these models using the mean absolute deviation (MAD).
(e) Compare the accuracy of these models using the mean squared error (MSE).
④ A manufacturer of printed circuit boards uses exponential smoothing with trend to
forecast monthly demand of its product. At the end of December, the company wishes to
forecast sales for January. The estimate of trend through November has been 200
additional boards sold per month. Average sales have been around 1000 units per month.
The demand for December was 1100 units. The company uses α= 0.20 and β= 0.10.
Make a forecast including trend for the month of January.

⑤ A producer of picture frames uses a tracking signal with limits of 4 to decide

whether a forecast should be reviewed. Given historical information for the past four
weeks, compute the tracking signal and decide whether the forecast should be reviewed.
The MAD for this item was computed as 2.
Actual Cumulative Tracking
weeks sales forecast Deviation deviation signal
1 12 11 6 3
2 14 13
3 14 14
4 16 14
⑥ The following data were collected on the study of the relationship between a
company’s retail sales and advertising dollars:
(a) Obtain a linear regression line for the data.
(b) Compute a correlation coefficient and determine the strength of the linear relationship.
(c) Using the linear regression equation develops a forecast of retail sales for advertising dollars
of $40,000.