Chapter 4 part one
Multiple-Choice Questions (MCQs)
1. Which method uses historical data from a similar product or market to predict
future demand?
a) Panel of Experts
b) Sales Force Estimates
c) Historical Analogy
d) Delphi Method
Answer: c) Historical Analogy It involves using demand data from a comparable
product or market to forecast future demand.
2. What is the main focus of a market feasibility study?
a) Selling products effectively
b) Analyzing market viability for success
c) Developing new products
d) Reducing costs of production
Answer: b) Analyzing market viability for success It assesses whether the project can
succeed in the target market.
3. Which of the following is NOT a qualitative demand forecasting method?
a) Delphi Method
b) Market Search
c) Regression Analysis
d) Sales Force Estimates
Answer: c) Regression Analysis Regression analysis is a quantitative forecasting
method.
4. In demand forecasting, the moving average technique primarily helps to:
a) Smooth out short-term fluctuations
b) Predict demand for a new product
c) Determine the market share
d) Calculate per capita consumption
Answer: a) Smooth out short-term fluctuations Moving averages help in identifying
trends by averaging past data.
5. Which type of data is used in a desk study?
a) Customer surveys conducted recently
b) Previously prepared secondary data
c) Forecasted future sales figures
d) Actual demand data collected over the last month
Answer: b) Previously prepared secondary data Desk studies rely on secondary data
such as reports and existing statistics.
6. The main objective of demand forecasting is to:
a) Set production schedules only
b) Predict future sales volumes and revenues
c) Manage inventory levels only
d) Reduce costs
Answer: b) Predict future sales volumes and revenues Forecasting helps in estimating
future demand to inform planning.
7. Which of the following is an advantage of qualitative forecasting methods?
a) They are based on historical data
b) They are useful when data is unavailable or unreliable
c) They use mathematical models only
d) They guarantee accuracy
Answer: b) They are useful when data is unavailable or unreliable Qualitative methods
depend on expert judgment and are useful in data-scarce situations.
8. A three-week moving average forecast is best used for:
a) Monthly sales data
b) Short-term demand trends
c) Yearly demand projections
d) Long-term market analysis
Answer: b) Short-term demand trends The three-week moving average smooths out
weekly fluctuations.
9. The Delphi Method involves:
a) Random sampling of customers
b) Multiple rounds of questionnaires among experts
c) Using government statistics only
d) Analyzing historical sales data
Answer: b) Multiple rounds of questionnaires among experts It refines forecasts through
iterative expert feedback.
10. Which demand forecasting method uses actual data and a mathematical model for
projections?
a) Naïve Technique
b) Regression Model
c) Panel of Experts
d) Market Search
Answer: b) Regression Model Regression uses historical data and statistical techniques
to predict demand.
11. What is the main disadvantage of the naïve forecasting technique?
a) It is complex to implement
b) It does not consider past data
c) It uses only previous period demand as the forecast, ignoring trends or seasonality d) It
requires extensive data collection
Answer: c) It uses only previous period demand as the forecast, ignoring trends or
seasonality This simplicity makes it less accurate in dynamic markets.
12. A desk study is mainly based on:
a) New primary data collection
b) Secondary data and previous reports
c) Customer interviews d) Actual sales tracking
Answer: b) Secondary data and previous reports It uses pre-existing information to
analyze market potential.
13. Which forecasting method is most appropriate when there is no historical data
available?
a) Regression Analysis
b) Delphi Method
c) Moving Average
d) Average Consumption Per Capita (ACP)
Answer: b) Delphi Method Expert opinion methods are suitable when data is scarce or
unavailable.
14. The main purpose of a demand forecast is to:
a) Allocate marketing budget
b) Estimate potential sales and assist in planning
c) Decide pricing strategies only
d) Improve customer service
Answer: b) Estimate potential sales and assist in planning Forecasting supports strategic
decision-making by estimating future demand.
15. In the context of demand forecasting, 'per capita consumption' is:
a) The average amount of product consumed per person in a population
b) The total demand divided by the number of competitors
c) The forecasted demand for each product
d) The number of customers served per week
Answer: a) The average amount of product consumed per person in a population It is
used to estimate total demand based on population data.
True/False Questions
1. A market feasibility study helps determine if a product can physically be
manufactured successfully. False It assesses the market potential, not manufacturing
capabilities.
2. The moving average technique is suitable for predicting demand in highly seasonal
markets without adjustments. False Seasonality requires adjusted methods for
accurate forecasting.
3. Historical Analogy demand forecasting uses data from a similar product or market
to predict future demand. True It leverages existing data from comparable markets.
4. Qualitative forecasting methods depend primarily on hard data and statistical
models. False They rely on expert opinion and subjective judgment.
5. A desk study involves collecting new primary data through surveys and
interviews. False It primarily involves secondary data from existing sources.
6. The main objective of demand forecasting is to eliminate the need for marketing
strategies. False Forecasting aids in planning and marketing, not replacing strategies.
7. The Delphi method involves experts responding to questionnaires over multiple
rounds with feedback after each round. True It refines demand estimates through
iterative expert input.
8. A simple moving average gives more weight to recent data points than older
ones. False In simple moving averages, all data points have equal weight.
9. Demand forecasting techniques such as regression analysis require extensive data
for accurate predictions. True They depend on historical data to develop mathematical
models.
10. The naïve demand forecasting method always provides highly accurate long-term
forecasts. False It is simple and may be inaccurate for complex demand patterns.
11. Secondary data sources include government reports, industry publications, and
previous research. True They provide valuable pre-existing information.
12. Demand forecasting with qualitative methods is preferred when dealing with well-
established, data-rich markets. False It’s more useful in markets lacking sufficient data.
13. Forecasting demand is only useful for manufacturing companies and not for service
industries. False Demand forecasting is valuable in both sectors.
14. The purpose of demand forecasting includes estimating sales volume, planning
inventory, and budgeting. True Forecasting supports several planning activities.
15. In a demand forecast, per capita consumption is useful when the population size
remains constant. True It helps project total demand given a stable per person
consumption rate.
Problem 1: Three-Month Moving Average Forecasting
Given Data: Customer arrivals over the past 3 months:
Month 2: 810 customers
Month 3: 740 customers
Month 4: 790 customers
Question: A. Use a 3-month moving average to forecast customer arrivals for Month 5. B. If the
actual demand in Month 5 is 805 customers, what will be the forecast for Month 6?
Solution & Explanation: A. Forecast for Month 5: Use the average of the demand in Months 2,
3, and 4: Forecast for Month 5=3D2+D3+D4=3810+740+790=32340=780 The forecasted
number of customers for Month 5 is 780.
B. Forecast for Month 6: Now, use actual demand from Month 5 (which is given as 805) along
with previous demands: Forecast for Month 6=3D3+D4+D5=3740+790+805=32335
≈778.33 The forecasted number of customers for Month 6 is approximately 778.
Problem 2: Naive Forecasting Technique
Given Data: Demand for the last 5 months:
January: 120 units
February: 135 units
March: 150 units
April: 140 units
May: 160 units
Question: What is the forecast for June using the naive technique?
Solution & Explanation: The naive technique predicts that the demand for the next month will be
the same as the current month: Forecast for June=Demand in May=160 units Thus, the forecast
for June is 160 units.
Problem 3: Moving Average for Weekly Demand
Given Data: Number of patient arrivals in the past 3 weeks:
Week 1: 400 patients
Week 2: 380 patients
Week 3: 411 patients
Question: A. Compute a 3-week moving average forecast for Week 4. B. If actual patient arrivals
in Week 4 are 415, what is the forecast error for Week 4?
Solution & Explanation: A. Forecast for Week 4: Average of weeks 1, 2, and 3: 3400+380+411
=31191≈397 Forecasted patients for Week 4 are approximately 397.
B. Forecast Error: The forecast error is the difference between actual and forecasted
demand: Error=Actual−Forecast=415−397=18 Forecast error is 18 patients, indicating the
forecast underestimated actual demand.
