(A) Use 3-period weighted movingaverage with the weights of 0.2, 0.3, and 0.5 to

Question

(A) Use 3-period weighted movingaverage with the weights of 0.2, 0.3, and 0.5 to forecast the salesof 2008.

(B) Use simple exponential smoothingtechnique with smoothing constant of 0.3 to forecast the sales of2008, given the forecast for 2006 has been 3330. [Hint: Use theforecast for 2006 to figure out the forecast for 2007 and then usethat forecast to find out the forecast for 2008.]

(C) Use 3-period moving average toforecast the sales of 2008. What is the forecast? What is the MADfor this model?

(D) Use the following trend model toforecast the sales of 2008. To obtain the trend model, 2003 wasentered into the computer as Period 1, 2004 as Period 2, 2005 asPeriod 3, 2006 as Period 4, .. etc.
Sales = 1100 + 950 * Period

Explanation / Answer

a) 3-period weighted MA: 0.5*4920 + 0.3*3700 + 0.2*2580 = 4086 b) Exponential smoothing: Forecast for 2007: 0.7*3330 + 0.3*3700 = 3441 Forecast for 2008: 0.7*3441 + 0.3*4920 = 3884.7 c) 3-period MA: (4920 + 3700 + 2580)/3 = 3733.33 MAD = absolute error / N Forecast for 2006: (1975+2150+2580)/3 = 2235 Forecast for 2007: (2150+2580+3700)/3 = 2810 Abs error for 2006: 3700 - 2235 = 1465 Abs error for 2007: 4920 - 2810 = 2110 MAD = (1465+2110)/2 = 1787.5 d) Trend model: 2008 = period 6 Sales = 1100 + 950*6 = 6800

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