Discussion Question:

1
Aspects that are objective and elements that are subjective are both included in the forecasting model
for qualitative models. Because of their adaptability, qualitative models are useful in situations in which
subjective considerations are important. When quantitative data are difficult to gather, qualitative
models may be appropriate.

7
An exponential smoothing is a kind of weighted moving average that employs a set of weights that
decrease in value exponentially. This type of smoothing is also known as an exponentially decreasing
weighted moving average. When smoothing out data, this form of weighting is used, which takes into
consideration previous values in order to do so.

8
MAD, MSE, and MAPE are examples of commonly used measures of the accuracy of forecasts.
Determine which forecasting model delivers the most accurate results by doing the following
calculations for each instrument: mean square error, maximum absolute percentage error, and standard
deviation (MSE, MAPE, and MAD). The prognosis may be expected to have a smaller margin of error the
more accurate it is.

12
When the smoothing constant, sigma, is high (close to 1.0), more weight is given to current data; when
sigma is low (close to 0.0), more weight is given to historical data. sigma may be thought of as a ratio
between recent and historical data. When sigma is large (near to 1.0), greater importance is placed on
data that was collected more recently.

14
When applying exponential smoothing, each of the previous values is assigned weights that, over the
course of time, experience a value reduction that is exponential in nature. It is able to concentrate all of
its attention on the most recent period of time (with an alpha of 1.0). This is the naive strategy, which
focuses all of its attention on the actual demand from the time before, but in actuality, this is not the
best way to go about things.

20
There are several situations in which this has occurred. The demand for completed items such as
automobiles is directly proportionate to the demand for the component parts and raw resources that go
into making those finished products, such as steel and tires.

21
As we go farther into the future, it is evident that it will become more difficult to make accurate
forecasts; as a result, we should lay less weight on the predictions.

A:

YEAR MILEAGE

1 3000

2 4000

3 3400

4 3800

5 3700

Mileage for 6th year using 2 year moving average = = 3,750 miles

B:

YEAR MILEAGE 2-Year Moving average Calculating absolute error

1 3000 -

2 4000 -

(3,000 + 4,000)/2 = 3,500 3,400 - 3,500 = -100

3 3400

(3,400 + 4,000)/2 = 3,700 3,800 -3,700 = 100

4 3800

(3,800 + 3,400)/2 = 3,600 3,700 -3,600 = 100

5 3700

MAD
Sum (Actual – Forecast) =
300

MAD = = 100
C:

YEAR MILEAGE Weight Weight moving average Calculating error

1 3000 0.4 - -

2 4000 0.6 - -

(3,000*0.4)+(4,000*0.6)/1= 3,600 3,400 - 3,600 = -200

3 3400 And so on for the
rest
(3,400*0.6)+(4,000*0.4)/1= 3,640 3,800 - 3,640 = 160
4 3800

(3,800*0.6)+(3,400*0.4)/1= 3640 3,700 -3640 = 60

5 3700

MAD
sum(Actual -Forecast ) = 420

MAD = = 140

D:
YEAR MILEAGE Forecast

1 3000 3000

2 4000 3,000 + 0.5 (3,000 - 3,000) = 3,000

3 3400 3,000 + 0.5 (4,000 - 3,000) = 3,500
4 3800 3,500 + 0.5 (3,4000 - 3,500) = 3,450
5 3700 3,450 + 0.5 (3,800 - 3,450) = 3,625

6 ? 3,625 + 0.5 (3,700 - 3,625) = 3,663

Forecast for year 6 = 3,663 miles

MONTH SALE
S
January 20
February 21
March 15
April 14
May 13
June 16
July 17
August 18
September 20
October 20
November 21
December 23

A:

SAlES
25

20

15

10

0
0 2 4 6 8 10 12 14

B:
1

The naive technique supposes that the demand in the subsequent period will be the same as the
demand in the most recent era. Now replace the demand for the month of January, which was 20, with
the demand for December, which was 23. As was stated before, the demand in December is equivalent
to the demand in January, and 23 is thus deemed to be the optimal value. As a result, the naïve
technique arrives at the temperature of 23 for the month of January.

F=Month1+ Month2+ Month3/3

F= 20+21+23/3

F=21.33

Moving Average = 17*0.1+18*0.1+20*0.1+20*0.2+21*0.2+23*0.3

Moving Average = 20.6

F (Oct) = 0.3x 20 + .7x 18= 18.6

F (Nov) = 0.3x 20 + 0.7x 18.6 = 19.02

F (Dec) = 0.3x 21 + 0.7 x19.02= 19.6 14

F (Jan) = 0.3x 23+ 0.7 x 19.6 14 = 20.63

Hence, as per exponential smoothing for January is 20.63, when September demand is taken as 18.

5
T SALES At T^2
1 20 20 1
2 21 42 4
3 15 45 9
4 14 56 16
5 13 65 25
6 16 96 36
7 17 119 49
8 18 144 64
9 20 180 81
10 20 200 100
11 21 231 121
12 23 276 144
C
Since the later portion of the trend displays trend from June onwards, trend projection might be utilized
in this instance to estimate next March given that the trend started in June.