Question

1.- Using time series shown in the table

a) Determine if moving averages is an adequate method to use for the time series shown in the table.

b) If the answer to a) is YES, then apply the weighted moving averages method using

alpha1 = 0.5

alpha2 = 0.4

alpha3 = 0.1

Week	Demand
1	200
2	250
3	175
4	186
5	225
6	240
7	250
8	190
9	185
10	210
11	205
12	207
13

Answer 1

First, let’s calculate the 3 period moving average. It is done by averaging the previous three periods and using it as a forecast for the fourth period. It is shown in 3MA column. Next we calculate the error, absolute error, square of the error and absolute percentage of the error. Next we calculate the running sum of forecasting error (RSFE), mean absolute deviation (MAD), mean square of error (MSE) and mean absolute percentage error (MAPE).

From the values we can see that the RSFE, MAD and MAPE values are not very large and thus the moving average is not a bad indicator to forecast the value.

Now, we can use the alpha values with in order to calculate the weighted moving average. The highest value will be used for the latest period and the lowest value for the farthest period.

The calculated values are shown below.