Running Head: MGT87540-5 Problems

MGT87540-5 Problems

Coby Moke

California Southern University

MGT87540

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April 9, 2020

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Dr. Greg Grossman

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 MGT87540-2 Problems 1

Problems

5-1 Describe briefly the steps used to develop a forecasting system.

The first step is to define the problem and ensure that the problem is understood so that the

correct data will be collected. The second step would be to develop a model that will be used to

analyze the data. The third step is to acquire the data/information that will determine whether the

forecast will be qualitative or quantitative. It can also be beneficial as part of the third step or as

another step to complete a preliminary analysis of the data to make sure what is being collected

will be usable. The fourth step is to use the model selected to analyze the data that was collected

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in the third step. The fifth step would be to make sure that the model selected performed as

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desired and it provides the opportunity to evaluate the complete system to see if any changes are

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needed.
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5-19 In Problems 5-17 and 5-18, three different forecasts were developed for the demand for

fertilizer. These three forecasts are a 3-year moving average, a weighted moving average, and a
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trend line. Which one would you use? Explain your answer.
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Year Demand 3-yr Moving Absolute Weighted Absolute Error

Avg. Error Moving Avg.
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1 4
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2 6
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3 4

4 5 4+6+4/3 = 4.67 5-4.67 = 0.33 4+6+(4x2)/4 = 4.5 5-4.5 = 0.5

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5 10 6+4+5/3 = 5 10-5 = 5 6+4+(5x2)/4 = 5 10-5 = 5

6 8 4+5+10/3 = 8-6.33 = 1.67 4+5+(10x2)/4 = 8-7.25 = 0.75

4.75 7.25

7 7 5+10+8/3 = 7-7.67 = 0.67 5+10+(8x2)/4 = 7-7.75 = 0.75

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 MGT87540-2 Problems 2

7.67 7.75

8 9 10+8+7/3 = 9-8.33 = 0.67 10+8+(7x2)/4 = 8 9-8 = 1

8.33

9 12 8+7+9/3 = 8 12-8 = 4 8+7+(9x2)/4 = 12-8.25 = 3.75

8.25

10 14 7+9+12/3 = 14-9.33 = 4.67 7+9+(12x2)/4 = 14-10 = 4

9.33 10

11 15 9+12+14/3 = 15-11.67 = 9+12+(14x2)/4 = 15-12.25 = 2.75

11.67 3.33 12.25

MAD 20.34/8 = 18.5/8 = 2.3125

2.5425

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Year Demand Predicted Absolute Error

Y=1.055x+2.218

1 4 3.273 4-3.273 = 0.727

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2 6 4.328 6-4.328 = 1.672

3 4 5.383 4-5.383 = 1.383

4 5 6.438 5-6.438 = 1.438

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 MGT87540-2 Problems 3

5 10 7.493 10-7.493 = 2.507

6 8 8.548 8-8.548 - 0.548

7 7 9.603 7-9.603 = 2.603

8 9 10.658 9-10.658 = 1.658

9 12 11.713 12-11.713 = 0.287

10 14 12.768 14-12.768 = 1.232

11 15 13.823 15-13.823 = 1.177

MAD 15.232/11 = 1.3847

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I would use the trend line as my forecast model because it had the lowest MAD of the three

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models at 1.3847.

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5-25 Using the trend projection method, develop a forecasting model for the sales of Cool-Man
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air conditioners (see Problem 5-21).
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The forecasting model using trend projection method would be Y = 33.6x + 421.2.

5-29 Emergency calls to Winter Park, Florida’s 911 system, for the past 24 weeks are as follows:

Week Calls Week Calls Week Calls

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 MGT87540-2 Problems 4

1 50 9 35 17 55

2 35 10 20 18 40

3 25 11 15 19 35

4 40 12 40 20 60

5 45 13 55 21 75

6 35 14 35 22 50

7 20 15 25 23 40

8 30 16 55 24 65

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(a) Compute the exponentially smoothed forecast of calls for each week. Assume an initial

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forecast of 50 calls in the first week and use a = 0.1. What is the forecast for the 25th week?

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Week rs e Calls Forecast
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1 50
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2 35 50+0.1(50-50) = 50
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3 25 50+0.1(35-50) = 48.5
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4 40 48.5+0.1(25-48.5) = 46.15

5 45 46.15+0.1(40-46.15) = 45.535
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6 35 45.535+0.1(45-45.535) = 45.482

7 20 45.482+0.1(35-45.482) = 44.433
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8 30 44.433+0.1(20-44.433) = 41.99
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9 35 41.99+0.1(30-41.99) = 40.791

10 20 40.791+0.1(35-40.791) = 40.212
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11 15 40.212+0.1(20-40.212) = 38.191

12 40 38.191+0.1(15-38.191) = 35.872

13 55 35.872+0.1(40-35.872) = 36.284

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 MGT87540-2 Problems 5

14 35 36.284+0.1(55-36.284) = 38.156

15 25 38.156+0.1(35-38.156) = 37.84

16 55 37.84+0.1(25-37.84) = 36.556

17 55 36.556+0.1(55-36.556) = 38.401

18 40 38.401+0.1(55-38.401) = 40.061

19 35 40.061+0.1(40-40.061) = 40.055

20 60 40.055+0.1(35-40.055) = 39.549

21 75 39.549+0.1(60-39.549) = 41.594

22 50 41.594+0.1(75-41.594) = 44.935

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23 40 44.935+0.1(50-44.935) = 45.441

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24 65 45.441+0.1(40-45.441) = 44.897

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25 44.897+0.1(65-44.897) = 46.907
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(b) Reforecast each period using a = 0.6.
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Week Calls Forecast

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1 50

2 35 50+0.6(50-50) = 50
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3 25 50+0.6(35-50) = 41

4 40 41+0.6(25-41) = 31.4
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5 45 31.4+0.6(40-31.4) = 36.56
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6 35 36.56+0.6(45-36.56) = 41.624

7 20 41.624+0.6(35-41.624) = 37.65
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8 30 37.65+0.6(20-37.65) = 27.06

9 35 27.06+0.6(30-27.06) = 28.824

10 20 28.824+0.6(35-28.824) = 32.53

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 MGT87540-2 Problems 6

11 15 32.53+0.6(20-32.53) = 25.012

12 40 25.012+0.6(15-25.012) = 19.005

13 55 19.005+0.6(40-19.005) = 31.602

14 35 31.602+0.6(55-31.602) = 45.641

15 25 45.641+0.6(35-45.641) = 39.256

16 55 39.256+0.6(25-39.256) = 30.703

17 55 30.703+0.6(55-30.703) = 45.281

18 40 45.281+0.6(55-45.281) = 51.112

19 35 51.112+0.6(40-51.112) = 44.445

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20 60 44.445+0.6(35-44.445) = 38.778

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21 75 38.778+0.6(60-38.778) = 51.511

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22 50 51.511+0.6(75-51.511) = 65.604
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23 40 65.604+0.6(50-65.604) = 56.242

24 65 56.242+0.6(40-56.242) = 46.497
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25 46.497+0.6(65-46.497) = 57.599
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(c) Actual calls during the 25th week were 85. Which smoothing constant provides a superior
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forecast? When just looking to see which smoothing constant provides a forecast that is close to
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the actual calls, then the smoothing constant of 0.6 is the best one to use. I calculated the MAD
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in an Excel spreadsheet and came up with 0.1 = 13.714 and 0.6 = 14.012 so the MAD is very
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close and I would still use 0.6.

5-37 Management of Davis’s Department Store has used time-series extrapolation to forecast
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retail sales for the next four quarters. The sales estimates are $100,000, $120,000, $140,000, and

$160,000 for the respective quarters before adjusting for seasonality. Seasonal indices for the

four quarters have been found to be 1.30, 0.90, 0.70, and 1.10, respectively. Compute a

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 MGT87540-2 Problems 7

seasonalized or adjusted sales forecast.

Quarter Forecast Seasonal Adjustment Final Forecast

1 $100,000 1.3 $130,000

2 $120,000 0.9 $108,000

3 $140,000 0.7 $98,000

4 $160,000 1.1 $176,000

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