5. A retailer is importing a certain brand of products and selling them online.

Question

5. A retailer is importing a certain brand of products and selling them online. In the previous eight months, the retailer received a healthy online ordering trend. The realized sales revenucs for this brand of products are ta two bulated in the following table. C urrently, the retailer is debating the choice of candidate models for sales forecasting. Use Excel to compute the historical forecasts based on 3-month simple moving average and 4-month weighted moving average. Evaluate the accuracy of each model with respect to mean absolute deviation (MAD) and mean square error (MSE) from May to August. Based on these performance statistics, which model would you recommend to the retailer? Please provide justification(s) Month Actual 3-Month Simple 4-Month Weighted AD SE AD SE (t) Sales (S) Moving Ave Forecast Moving Ave Forecast for for Next Month Next Month 1700 2100 1900 Jan Feb Mar Apr 2200 May 1800 Jun Jul Aug 2100 Show below one period of sample calculations (both SMA and WMA). Attach more pages if needed. 2000 2400 Do not forget to attach a print screen of your Excel spreadsheet, MAD for SMA = MAD for WMA MSE for SMA MSE for WMA =

Explanation / Answer

Calculations for 3 month moving average

Calculations for 4 month moving average

Month Actual Sales 3Month MA AD SE Jan 1700 Feb 2100 Mar 1900 1900 133.3333333 26666.67 Apr 2200 2066.666667 111.1111111 15555.56 May 1800 1966.666667 155.5555556 28888.89 Jun 2000 2000 133.3333333 26666.67 Jul 2400 2066.666667 222.2222222 62222.22 Aug 2100 2166.666667 155.5555556 28888.89

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