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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
Problem 3:
1
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:
January 20 22
Februar 21
y
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 2003 sales.
Year Sales
(Units)
1996 100
1997 110
1998 122
1999 130
2000 139
2001 152
2002 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, 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 =
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 1 ( A t 1 Ft 1 ) 500 0.1( 450 500) 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
S = 15 S = 16
2.56 2.95
SE 3.5 3.9
7
Problem 5:
S X = S Y S S XY
28 =917 X2=140 =
3961
x
x 28 4
n 7
y
y 917 131
n 7
b
xy nxy 3961 (7)(4)(131) 293 10.46
x nx
2 2
140 ( 7)( 4 )
2
28
a y bx 131 (10.46 4) 89.16
Therefore, the least squares trend equation is:
y a bx 89.16 10.46 x
To project demand in 2003, we denote the year 2003 as x = 8, and:
Sales in 2003 89.16 10.46 * 8 172.84
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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
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RFSE 24
Tracking Signal = 2.1 MADs
MAD 11.7
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.
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