Question

ASSIGNMENT: #2 a through c. NOTE: Problem 2b. (1), change toNaive with Trend
2. National Scan, Inc., sells radio frequency inventory tags. Monthly sales for a seven-month period were as follows: Month Feb. Mar. Apr. May Jun. Jul. Aug Sales (000 units) 19 18 15 20 18 22 20 a. Plot the monthly data on a sheet of graph paper. b. Forecast September sales volume using each of the following: (1) The naive approach. (2) A five month moving average. (3) A weighted average using .60 for August, 30 for July, and 10 for June. (4) Exponential smoothing with a smoothing constant equal to 20, assuming a a March forecast of 19(000). (5) A linear trend equation. c. Which method seems least appropriate? Why? (Hint: Refer to your plot from part a.)

Answer 1

22 2 20 19 18 17 16 15 14 13 12 11 0 F M A M J -> Month

2(i) Trend equation

y=0.5x+16.857

where x denotes the year ( 1 for Feb and 6 for July)

Month	Sales	Forecast	Error	abs error
1	19	17.357	1.643	1.643
2	18	17.857	0.143	0.143
3	15	18.357	-3.357	3.357
4	20	18.857	1.143	1.143
5	18	19.357	-1.357	1.357
6	22	19.857	2.143	2.143
7	20	20.357	-0.357	0.357
8		20.857

Sept forecast =20.857

Mean absolute deviation = 1.449

(ii) 5MMA

Month	Sales	Forecast	Error	abs error
1	19
2	18
3	15
4	20
5	18
6	22	18	4	4
7	20	18.6	1.4	1.4
8		19

Sepr forecast =19

MAD = 2.7

(iii) WMA

Month	Sales	Forecast	Error	abs error
1	19
2	18
3	15
4	20	16.3	3.7	3.7
5	18	18.3	-0.3	0.3
6	22	18.3	3.7	3.7
7	20	20.6	-0.6	0.6
8		20.4

Sept forecast =20.4

MAD =2.075

(iv) EA

Month	Sales	Forecast	Error	abs error
1	19
2	18	19
3	15	18.8
4	20	18.04	1.96	1.96
5	18	18.432	-0.432	0.432
6	22	18.3456	3.6544	3.6544
7	20	19.07648	0.92352	0.92352
8		19.26118

Sept forecast = 19.2611

MAD = 1.1742

Thw sorst forecast is with 5 minths moving average which has only two values to find MAD, which is nhighest of all.