The Bonavista Patient Transfer Company is considering the purchase of a new ambulance. The decision will rest partly on the anticipated distance to be driven next year. The kilometers driven during the past five years are as follows:
Year
1 3000
2 4000
3 3400
4 3800
5 3700
.1. Forecast the number of kilometers for next year using a two-year moving average.
2. Find the MAD based on the two-year moving average forecast in part (a). (Hint: You will have only three years of matched data.)
3. Use a weighted two-year moving average with weights of 0.4 and 0.6 to forecast next year's mileage. (The weight of 0.6 is for the most recent year.)
4. What MAD results from using this approach to forecasting? (Hint: You will have only three years of matched data.)
ANSWER::
1).
Forecast = Sigma(Demand in previous N periods) / N
Where N = 2
FORECAST 3 = (3000 + 4000) / 2 = 3500
FORECAST 4 = (4000 + 3400) / 2 = 3700
FORECAST 5 = (3400 + 3800) / 2 = 3600
FORECAST 6 = (3800 + 3700) / 2 = 3750
2).
MAD
|
PERIOD |
ACTUAL |
FORECAST |
DEVIATIONS |
ABSOLUTE DEVIATION |
|
1 |
3000 |
|||
|
2 |
4000 |
|||
|
3 |
3400 |
3500 |
-100 |
100 |
|
4 |
3800 |
3700 |
100 |
100 |
|
5 |
3700 |
3600 |
100 |
100 |
|
SIGMA |
100 |
300 |
MAD = SIGMA(ABS DEV) / N
MAD = 300 / 3 = 100
3) and 4)
. Forecast = Sigma(weight for period N * Demand for period N) / Sigma(weights)
Where the highest weights are multiplied with the most recent demand value.
FORECAST 3 = (0.4 * 3000) + 0.6 * 4000) / (0.4 + 0.6) = 3600
FORECAST 4 = (0.4 * 4000) + 0.6 * 3400) / (0.4 + 0.6) = 3640
FORECAST 5 = (0.4 * 3400) + 0.6 * 3800) / (0.4 + 0.6) = 3640
FORECAST 6 = (0.4 * 3800) + 0.6 * 3700) / (0.4 + 0.6) = 3740
MAD
|
PERIOD |
ACTUAL |
FORECAST |
DEVIATIONS |
ABSOLUTE DEVIATION |
|
1 |
3000 |
|||
|
2 |
4000 |
|||
|
3 |
3400 |
3600 |
-200 |
200 |
|
4 |
3800 |
3640 |
160 |
160 |
|
5 |
3700 |
3640 |
60 |
60 |
|
SIGMA |
20 |
420 |
MAD = SIGMA(ABS DEV) / N
MAD = 420 / 3
MAD= 140
The Bonavista Patient Transfer Company is considering the purchase of a new ambulance.