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Problem 2: Forecasting (10 points) Given these sales figures over the last 6 weeks, your boss needs you to test two different
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Answer #1

(a) Let the number of actual units sold for week t be denoted by At and Forecast by Ft

for 3 period moving average forecast, Ft = (At-1 + At-2 + At-3) / 3

Calculating using the above formula -

Period at Ft Error Absolute Error
1 523
2 587
3 622
4 601 577.33 23.67 23.67
5 615 603.33 11.67 11.67
6 578 612.67 -34.67 34.67
7 598.00
23.33
MAD

MAD = 23.33

(b) for 2 period weighted moving average, Ft = 0.6At-1 + 0.4At-2

Calculating using the above -

Period at Ft Error Absolute Error
1 523
2 587
3 622 548.60 73.40 73.40
4 601 601.00 0.00 0.00
5 615 613.60 1.40 1.40
6 578 606.60 -28.60 28.60
7 600.20
25.85
MAD

MAD = 10.00

(c) Since 3 period moving average forecast has lower MAD, it is a better forecast

Hence, forecast for Week 7 = 598 units

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