3. Consider the following data representing monthly retail sales of athletic sho

Question

3. Consider the following data representing monthly retail sales of athletic shoes: Month January February March April May June July August September October November December Sales($000) $328 337 341 367 385 403 389 376 428 305 278 450 Input this data into an Excel spreadsheet and do the following: a. Calculate a three-month moving average forecast. What is you forecast for month b. Use exponential smoothing with a smoothing factor of 0.20 to calculate the forecast fo 13? month 13. Fit a simple regression model to the data in problem 3 above. What is your forecast for month 13

Explanation / Answer

As per policy only first question will be answered. Results of forecast is as below

a) Three month moving average is calculated by taking the average of forecast of last three months. In the question, in the absence of information, forecast for first three months are assumed to be same as actuals. Then the remaining are calculated accordingly. For example.

Forecast of April = (forcast of Jan+forecast feb + forecast Mar)/ 3 = 335.3 , and so on

Forecast for 13th month =  (forcast of Oct+forecast Nov + forecast Dec)/ 3 = 337.5

b) Forecast using exponential smoothing is calculated by the formula

Forecast of next month = Factor * Actual of this month + (1-factor) * Forecast of this month

Forecast for jan is assumed to be same as actual

Forecast of feb = 0.2*actual of Jan + 0.8*forecast of jan

Forecast of 13th = 0.2*actual of dec + 0.8*forecast of dec = 0.2*450 + 0.8*347 = 367.80

Acutal Moving average Forecast Exponential Smoothening Forecast Jan 328 328.0 328.00 Feb 337 337.0 328.00 Mar 341 341.0 329.80 April 367 335.3 332.04 May 385 337.8 339.03 Jun 403 338.0 348.23 Jul 389 337.0 359.18 Aug 376 337.6 365.14 Sep 428 337.6 367.32 Oct 305 337.4 379.45 Nov 278 337.5 364.56 Dec 450 337.5 347.25 13 337.5 367.80

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