Question

Problem 3-2 National Scan, Inc., sells radlo frequency Inventory tags. Monthly sales for a seven-month period were as follows: Sales Month(ee)Units Feb Mar Apr May Jun Jul Aug 2e 23 25 18 28 30 b. Forecast September sales volume using each of the folloWng: (1 A linear trend equation.(Round your Intermedlate calculatlons and final answer to 2 declmal places.) Yt thousands (2) A five-month moVing average. (Round your answer to 2 declmal places.) Moving averagehousands (3) Exponentlal smoothing with a smoothing constant equal to .20, assuming a March forecast of 18(000). (Round your Intermediete forecast values and final answer to 2 declmel places Forecast thousands (4) The nalve approach. Nalve approach thousands (5) A weighted average using .60 for August, 20 for July, and .20 for June. (Round your answer to 2 declmal places.) Weighted average thousands

Answer 1

The data given is as under:

Month Sales (000) Units # 1 Feb 2 Mar 20 23 3 Apr 4 May Jun 6 July Aug 18 28 30

A) LINEAR TREND EQUATION

A linear trend equation can be computed using MS excel, plotting a graph and adding a trendline to it.

National Scan Inc. 35 30 25 20 15 10 30 y 1.8214 x + 14.286 25 23 20 18 Apr May Jun July Aug Feb Mar

The linear trend equation is, Y = 1.8214 X + 14.286

For the month of September (x=8), the forecast would be

= (1.8214 x 8) + 14.286 = 28.8572 Units = 29 Units approx.

B) FIVE MONTH MOVING AVERAGE

The average of last five months (Apr-Aug) will be taken as the new forecast for September

= (7+25+18+28+30)/5 = 21.6 units

C) EXPONENTIAL SMOOTHING

Smoothing constant = 0.20

March Forecast = 18 units

The formula for exponential smoothing forecast is-

Forecast (next month) = Forecast _{(current month)} + [Smoothing constant x )Actual_{(current month)} - Forecast_{(current month)} ) ]

The forecasted values are as under,

Actual Sales Forecasted Month Feb Mar Apr May Jun July Aug Sep (000) Unitssales 20 18.000 19.000 16.600 18.280 18.224 20.179 22.143 4 25 18 28 30

The forecast for the month of september is = 22.143 units

D) NAIVE APPROACH gives the last month actual sales as the new forecast.

The forecast for the month of September = Actual sales in Aug = 30 Units

E) WEIGHTED AVERAGE APPROACH

Aug = 0.60, July = 0.20, June = 0.20

Forecast for Sep = (Wt. of Aug X Actual sales in Aug) + (Wt. of July X Actual sales in July) + (Wt. of June X Actual sales in June)

= (0.60 x 30) + (0.20 x 28) + (0.20 x 18) = 27.2 Units