3.7 a.

Use simple linear regression analysis between number of apartment

units leased and university enrollments to forecast next semester's
apartment units leased if the enrollment next semester is expected to
be about 6,600:
ENROLL. UNITS
(,000s) LEASED
SEM. x y x2 xy y2

1 7.2 291 51.84 2,095.2 84,681

2 6.3 228 39.69 1,436.4 51,984
3 6.7 252 44.89 1,688.4 63,504
4 7.0 265 49.00 1,855.0 70,225
5 6.9 270 47.61 1,863.0 72,900
6 6.4 240 40.96 1,536.0 57,600
7 7.1 288 50.41 2,044.8 82,944
8 6.7 246 44.89 1,648.2 60,516
TOTALS 54.3 2,080 369.29 14,167.0 544,354

x= 54.3, y= 2,080, x2=369.29, xy= 14,167.0, y2 = 544,354

x2y - xxy 369.29(2,080) - 54.3(14,167.0)

a = ────────── = ─────────────────────
nx2 - (x)2 8(369.29) - (54.3)2

768,123.2 – 769,268.1 - 1,144.9

a = ──────────────── = ─────── = - 196.381
2,954.32 – 2,948.49 5.83

nxy - xy 8(14,167.0) – 54.3(2,080)

b = ───────── = ─────────────────
nx2 - (x)2 5.83

113,336 – 112,944 392

b = ───────────── = ───── = 67.238
5.83 5.83
Y = a + bX

Y = - 196.381 + 67.238(6.6) = 247.4 apartment units

3.7 Continued

b. What percent of the variation in apartment units leased is explained by

university enrollment?

n  xy -  x  y
r
[n  x  (  x )2 ][n  y 2  (  y )2 ]
2

8(14,167.0) - 54.3(2,080)
r
[8(369.29)  (54.3)2 ][8(544,354)  (2,080)2 ]

113,336 - 112,944
r
[2,954.32  2,948.49][4,354,832  4,326,400]

392 392 392

r    .963
[5.83][28, 432] 165,7583.5 6 407.13

r2 = .927 or 92.7 percent

University enrollment explains 92.7% of the variation in apartment units

leased. 7.3% of the variation in apartment units leased is unexplained
and is attributed to other causes.

c. Evaluate the usefulness of simple regression analysis in this

application.

Because 92.7% of the variation in apartment units leased is explained

by the university enrollment, simple regression analysis appears to be
a very useful tool for forecasting demand in this application.
3.9 a. Develop moving average forecasts for the past 10 months (Months 15-
24) for AP = 2, 4, 6, and 8 months.

      Absolute   Absolute   Absolute   Absolute

Month Lawsuits AP = 2 Error AP = 4 Error AP = 6 Error AP = 8 Error
1 16        
2 25        
3 16        
4 24        
5 38        
6 46        
7 54        
8 52        
9 51        
10 56        
11 67        
12 45        
13 53        
14 61        
15 55 57.0 2.0 56.50 1.50 55.500 0.500 54.875 0.125
16 69 58.0 11.0 53.50 15.50 56.167 12.833 55.000 14.000
17 63 62.0 1.0 59.50 3.50 58.333 4.667 57.125 5.875
18 57 66.0 9.0 62.00 5.00 57.667 0.667 58.625 1.625
19 48 60.0 12.0 61.00 13.00 59.667 11.667 58.750 10.750
20 55 52.5 2.5 59.25 4.25 58.833 3.833 56.375 1.375
21 61 51.5 9.5 55.75 5.25 57.833 3.167 57.625 3.375
22 51 58.0 7.0 55.25 4.25 58.833 7.833 58.625 7.625
23 56 56.0 0.0 53.75 2.25 55.833 0.167 57.375 1.375
24 53 53.5 0.5 55.75 2.75 54.667 1.667 57.500 4.500
Sum = 54.5 Sum = 57.25 Sum = 47.000 Sum = 50.625
       
MAD = 5.45 MAD = 5.73 MAD = 4.70 MAD = 5.06

b. Which AP results in the lowest mean absolute forecasting error?

Which AP would you recommend? Why?

AP = 6 results in the lowest MAD, so this would be the recommended

forecasting model since it demonstrated the best forecasting accuracy
over the past 10 months.

c. Using your recommended AP, forecast the number of lawsuits

expected for next month (Month 25).

Month 25: F25 = (48 + 55 + 61 + 51 + 56 + 53)/6 = 54.00 lawsuits

3.13 a. Use exponential smoothing to forecast monthly plastic pellet prices.
Compute what the forecasts would have been for all the months of
historical data for  = 0.1,  = 0.3, and  = 0.5 if the assumed forecast
for all ’s in the first month is $0.39.

Forecast Absolute Forecast Absolute Forecast Absolute

Month Plastic alpha = .1 Error alpha = .3 Error alpha = .5 Error
1 0.39 0.39 0.39 0.39
2 0.41 0.390 0.390 0.390
3 0.45 0.392 0.396 0.400
4 0.44 0.398 0.412 0.425
5 0.40 0.402 0.421 0.433
6 0.41 0.402 0.414 0.416
7 0.38 0.403 0.023 0.413 0.033 0.413 0.033
8 0.36 0.400 0.040 0.403 0.043 0.397 0.037
9 0.35 0.396 0.046 0.390 0.040 0.378 0.028
10 0.38 0.392 0.012 0.378 0.002 0.364 0.016
11 0.39 0.391 0.001 0.379 0.011 0.372 0.018
12 0.43 0.390 0.040 0.382 0.048 0.381 0.049
13 0.37 0.394 0.024 0.396 0.026 0.406 0.036
14 0.38 0.392 0.012 0.389 0.009 0.388 0.008
15 0.36 0.391 0.031 0.386 0.026 0.384 0.024
16 0.39 0.388 0.002 0.378 0.012 0.372 0.018
Sum = 0.231 Sum = 0.250 Sum = 0.266

MAD = 0.023 MAD = 0.025 MAD = 0.027

b. Which alpha () value results in the least mean absolute deviation for
Months 7-16.

 = .1 results in the lowest MAD.

c. Use the best alpha from Part b to compute the forecasted plastic
pellets price for Month 17.

F17 = .1(0.39) + .9(0.388) = 0.3882 dollars per pound