The Carbondale Hospital is considering the purchase of a new ambulance. The deci

Question

The Carbondale Hospital is considering the purchase of a new ambulance. The decision will rest partly on the anticipated mileage to be driven next year. The miles driven during the past 5 years are as follows:

he arbondale ospital is considering the purchase o a new ambulance. The decision w rest part on the anticipated mileage to be driven next year. The miles d en dun the past ears areas o s Year Mileage 3,000 3,950 3,450 3,850 ) Using a 2-year moving average, the forecast foear 6miles (round your response to the nearest whole number) b) f a 2-year moving average is used to make the forecast, the MAD based on this-miles (round your response to one decimal place). (Hint: You will have only 3 years of matched data.,) c) The forecast for year 6 using a weighted 2-year moving average with weights of 0.45 and 0.55 (the weight of 0.55 is for the most recent periodmiles (round your response to the nearest whole number). The MAD for the forecast developed using a weighted 2-year moving average with weights of 0.45d55miles (round your response to one decimal place) Hint: You will have only 3 years of matched data.) d using exponential smoothing with -0 20 and the forecast for year 1 being 3,000 the forecast for year 6-D miles round your response to the nearest whole number). Enter your answer in each of the answer boxes.

Explanation / Answer

Following to be noted :

Ft = ( At-1 + At-2 ) / 2

Where,

Ft = Forecast for period t

At-1, At-2 = Actual mileage for period t-1 and t-2 respectively

Using 2 year moving average , forecast for year 6 = 3775

Sum of absolute Deviation values = 225

Mean absolute deviation ( MAD ) = 225 / 3 ( i.e. number of observations ) = 75

If a 2 year moving average is used to make a forecast , the MAD based on this = 75

Ft = 0.55 x At-1 + 0.45 x At-2

Ft = Forecast for period t

At-1, At-2 = Actual mileage for period t-1 and t-2 respectively

The forecast for year 6 using weighted moving average = 3768

Sum of absolute deviation values = 277.5

Mean Absolute deviation ( MAD ) = 277.50/3 = 92.5

The MAD for forecast developed using a 2 year weighted moving average with weights 0.45 and 0.55 = 92.5

Ft = alpha x At-1 + ( 1 – alpha)x Ft-1

      = 0.20 x At-1 + 0.80 x Ft-1

Where,

Ft, Ft-1 = Forecasts for period t and t-1 respectively

At-1 = Actual mileage for period t-1

Alpha = exponential smoothing constant = 0.2

Basis above, forecast for period 6 = 3431

Forecast for year 6 using exponential smoothing forecast = 3431

Using 2 year moving average , forecast for year 6 = 3775

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