Question 2: This question is from chapter 3. This question has four sections: se

Question

Question 2: This question is from chapter 3. This question has four sections: section 2A, Section 2B, Section 2C, and Section 2D. Each section is worth 5 points adding up to 20 points. (Please show step by step work to receive full credits) Section 2A: This section is worth 5 points. Develop a forecast for the 5th period, given the data below, using a three-period moving average. Demand 41 43 38 56 Period Section 2B: This section is worth 5 points. Consider the data below: Period Demand 48 57 Using exponential smoothing with alpha 2, and assuming the forecast for period 3 was 40, what would the forecast for period 5 be?

Explanation / Answer

(2A)

For a 3-period moving average, Forecast for period-t (Ft)= (At-1 + At-2 + At-3) / 3

So, forecast for period 5 (F5) = (A4 + A3 + A2) / 3 = (56+38+43)/3 = 45.67

(2B)

Exponential smoothing forecast (Ft) = a * At-1 + (1 - a) * Ft-1

Given that 'a' = 0.2 and F3 = 40

F4 = 0.2 * A3 + (1 - 0.2) * F3 = 0.2 * 36 + 0.8 * 40 = 39.2

and F5 = 0.2 * A4 + (1 - 0.2) * F4 = 0.2 * 57 + 0.8 * 39.2 = 42.76

(2C)

Weighted moving average forecast (Ft)= 0.4 At-1 + 0.3 At-2 + 0.2 At-3 + 0.1 At-4

So, F5 = 0.4 A4 + 0.3 A3 + 0.2 A2 + 0.1 A1= 0.4? * 56 + 0.3 * 37 + 0.2 * 48 + 0.1 * 44 = 47.5

(2D)

Naiive approach (Ft) = Ft-1

i.e. F5 = F4 = 50

Alternatively, Naiive approach (Ft) = Ft + (Ft-1 - Ft-2) = 50 + (38 - 49) = 39

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