Quantitative Methods (BUS205)

Workshop 6 Time Series

1 (a) The Manageress (M) of Hillside Hotel has forecast the number of rooms needed for a week, and compares
these with actual bookings.

Time (t) 1 2 3 4 5 6 7
Demand D(t) 20 34 39 35 22 15 11
Manageress Forecast F(t) 19 31 43 37 25 16 12
FF(t)F(t)
Calculate (i) mean absolute deviation (MAD), (ii) mean square error (MSE).

(b) The Deputy Manageress (DM) thinks she is a better forecaster than the Manageress.

Time (t) 1 2 3 4 5 6 7
Demand D(t) 20 34 39 35 22 15 11
DM Forecast F(t) 23 37 42 38 23 17 13

Calculate (i) mean absolute deviation (MAD), (ii) mean square error (MSE).

(c) What conclusion do you draw regarding who is the better forecaster?

2. The mean number of absentees per day for a local business is given below. Use the additive decomposition
model to analyse the data.
Calculate (i) the trend
(ii) the average seasonal variations
(iii) the MSE.

Q1 Q2 Q3 Q4
2008 25.1 14.4 9.5 23.7
2009 27.9 16.9 12.4 26.1
2010 31.4 19.7 15.9 29.9
3. A electricity utility company has an interrupt programme whereby commercial companies can receive
favourable rates if they agree to cut back their consumption when asked to do so. Timko Products cut
back consumption at 12 noon on Thursday. The utility company must estimate Timko’s usage without
the interrupt. The interrupted service was from noon until 8:00. Data on the power consumption for the
previous 72 hours is shown in the following table.

Time Period Power Usage

Mon 12-16 1 124299
Mon 16-20 2 113545
Mon 20-24 3 41300
Tue 00-04 4 19281
Tue 04-08 5 33195
Tue 08-12 6 99516
Tue 12-16 7 123666
Tue 16-20 8 111717
Tue 20-24 9 48112
Wed 00-04 10 31209
Wed 04-08 11 37014
Wed 08-12 12 119968
Wed 12-16 13 156033
Wed 16-20 14 128889
Wed 20-24 15 73923
Thu 00-04 16 27330
Thu 04-08 17 32715
Thu 08-12 18 152465

a. Is there a seasonal effect over the 24 hour period? Calculate seasonal indices for the six four hour
periods.
b. Estimate Timko’s normal usage for the interrupted period.

Answers (to be confirmed)

1 (a) MAD = 2.14, MSE = 5.86. (b) MAD = 2.43, MSE = 6.43. (c) M is better.
2. Trend 17.88, 18.46, 19.04, 19.62, 20.20, 20.78, 21.37, 21.95, 22.53, 23.11, 23.69, 24.27, 24.85, 25.44, 26.02,
26.60.
Average Seasonal Variations Q1: 7.9, Q2: −3.8, Q3: −8.8, Q4: 4.6,
MSE = 0.398
3 Answers on separate spreadsheet