You have just been hired at the local ice cream distributor, and your new boss,
ID: 339569 • Letter: Y
Question
You have just been hired at the local ice cream distributor, and your new boss, Richard, asks you to decide between two forecasting methods for ice cream. He told you that a previous intern had calculated something called MAPE on the weighted averaging forecast method currently used by the company and that it was 03.74 percent. He thought that a method that took average weekly temperature into account might better predict weekly demand for ice cream. You tell Richard that you can do that with regression and produce an “insample” forecast (one based on known demand and temperature data). Based on these data, which method, averaging or regression, should Richard use? Run a regression of temperature on demand. Then use the regression equation to forecast demand and calculate the forecast error. Complete the table below and calculate the MAPE. Important: If using the FORECAST function in Excel, round the forecast of demand to the nearest whole number. If using a regression, use full precision or round to 5 digits before computing forecast. Then round the calculated forecast of demand to the nearest whole number. Round percentage error for each period to 2 digits (e.g. 05.12%) before calculating MAPE. Enter forecast as ### or #,###. Enter negative numbers as -#, -##, or -###.
You have just been hired at the local ice cream distributor, and your new boss, Richard, asks you to decide between two forecasting methods for ice cream. He told you that a previous intern had calculated something called MAPE on the weighted averaging forecast method currently used by the company and that it was 03.74 percent. He thought that a method that took average weekly temperature into account might better predict weekly demand for ice cream. You tell Richard that you can do that with regression and produce an “insample” forecast (one based on known demand and temperature data). Based on these data, which method, averaging or regression, should Richard use?
Run a regression of temperature on demand. Then use the regression equation to forecast demand and calculate the forecast error. Complete the table below and calculate the MAPE.
Important: If using the FORECAST function in Excel, round the forecast of demand to the nearest whole number. If using a regression, use full precision or round to 5 digits before computing forecast. Then round the calculated forecast of demand to the nearest whole number. Round percentage error for each period to 2 digits (e.g. 05.12%) before calculating MAPE. Enter forecast as### or #,###. Enter negative numbers as -#, -##, or -###.
Week
Actual Demand
Mean Temperature
Forecast of Demand
Forecast Error
3/1/2012
5,708
46
6,324
-616
3/8/2012
6,510
48
6,653
-143
3/15/2012
6,559
44
5,994
565
3/22/2012
7,160
51
3/29/2012
7,952
56
4/5/2012
7,640
53
4/12/2012
8,169
57
Calculate the MAPE for this period. Round the percentage error to 2 digits after the decimal point (enter as00.00)
%
Which method should Richard use? (Enter Averaging or Regression)
Week
Actual Demand
Mean Temperature
Forecast of Demand
Forecast Error
3/1/2012
5,708
46
6,324
-616
3/8/2012
6,510
48
6,653
-143
3/15/2012
6,559
44
5,994
565
3/22/2012
7,160
51
3/29/2012
7,952
56
4/5/2012
7,640
53
4/12/2012
8,169
57
Explanation / Answer
Now starting all over without taking the forecasted mentioned for 1st 3 weeks:
Week Actual Demand Mean Temperature Forecast of Demand Forecast Error APE 03-01-2012 5,708 46 6,324 -616 10.79% Takes Forecast as it was 03-08-2012 6,510 48 6,653 -143 2.20% Takes Forecast as it was 3/15/2012 6,559 44 5,994 565 8.61% Takes Forecast as it was 3/22/2012 7,160 51 6,198 962 13.44% 3/29/2012 7,952 56 6,137 1,816 22.83% 04-05-2012 7,640 53 6,173 1,467 19.20% 04-12-2012 8,169 57 6,124 2,045 25.03% Calculate the MAPE for this period. Round the percentage error to 2 digits after the decimal point (enter as00.00) % 14.59% Which method should Richard use? (Enter Averaging or Regression) Averaging As its MAPE is lowerRelated Questions
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