The following table shows the actual demand observed over the last 11 years: Yea

Question

The following table shows the actual demand observed over the last 11 years: Year 1 2 3 4 5 6 7 8 9 10 11

Demand 6 10 6 7 11 8 12 13 8 13 6

This exercise contains only parts b, c, and d.

b) Using the 3-year moving average, provide the forecast from periods 4 through 12 (round your responses to one decimal place).

Year 4 5 6 7 8 9 10 11 12

Forecast

c) Using the 3-year weighted moving average with weights 0.15, 0.35, and 0.50, using 0.50 for the most recent period, provide the forecast from periods 4 through 12 (round your responses to two decimal places).

Year 4 5 6 7 8 9 10 11 12

Forecast

d) Mean absolute deviation for the forecast developed using the 3-year moving average is 2.49 and for the 3-year weighted moving average is 2.83. Based on this information, the better forecast is achieved using the ______ approach.

Explanation / Answer

b) A three period moving average method averages the actual value for the previous three periods to generate the forecast for the next period.This can be calculated as Sum of the actual value of the previous three periods/3

Using the above formula the forecast for year 4 through 12 is calculated below:

c) Forecast for a period using three period weighted moving average is caculated as : the sum of the products of the actual value and their respective weight for the previous three periods.

Using the above formula the forecast for period  4–12 using weights of 0.15 ; 0.35 , and 0.50 is calculated below:

d)Based on the Mean absolute deviation given for both the methods ,the better forecast is achieved using the 3-year moving average method as it has a lower mean absolute deviation than the weighted moving average method.

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