PART 5: FORECASTING

Question 38
Given the following data:

Number of
Period
Complaints
1 60
2 65
3 55
4 58
5 64

Prepare a forecast for period 6 using each of these approaches:

a. The appropriate naive approach.

b. A three-period moving average.
c. A weighted average using weights of .50 (most recent), .30, and .20.
d. Exponential smoothing with a smoothing constant of .40.

Question 39
The Saki motorcycle dealer in the Minneapolis–St. Paul area wants to make an accurate
forecast of demand for the Saki Super TXII motorcycle during the next month. Because the
manufacturer is in Japan, it is difficult to send motorcycles back or reorder if the proper number
is not ordered a month ahead. From sales records, the dealer has accumulated the following
data for the past year:

Month Motorcycle Sales

January 9
February 7
March 10
April 8
May 7
June 12
July 10
August 11
September 12

1|Page
 October 10
November 14
December 16

a. Compute a 3-month moving average forecast of demand for April through January (of the

next year).

b. Compute a 5-month moving average forecast for June through January.

c. Compare the two forecasts computed in (a) and (b), using MAD. Which one should the
dealer use for January of the next year?

Question 40
The Fastgro Fertilizer Company distributes fertilizer to various lawn and garden shops. The
company must base its quarterly production schedule on a forecast of how many tons of
fertilizer will be demanded from it. The company has gathered the following data for the past
3 years from its sales records:

Year Quarter Demand for

Fertilizer (tons)
1 1 105
2 150
3 93
4 121
2 5 140
6 170
7 105
8 150
3 9 150
10 170
11 110
12 130

a. Compute a three-quarter moving average forecast for quarters 4 through 13 and compute
the forecast error for each quarter.
b. Compute a fve-quarter moving average forecast for quarters 6 through 13 and compute the
forecast error for each quarter.
c. Compute a weighted three-quarter moving average forecast, using weights of .50, .33, and
.17 for the most recent, next most recent, and most distant data, respectively, and compute
the forecast error for each quarter.
d. Compare the forecasts developed in (a), (b), and (c), using cumulative error. Which forecast
appears to be most accurate? Do any of them exhibit any bias?

2|Page
Question 41
Metro Food Vending operates vending machines in office buildings, the airport, bus stations,
colleges, and other businesses and agencies around town, and it operates vending trucks for
building and construction sites. The company believes its sandwich sales follow a seasonal
pattern. It has accumulated the following data for sandwich sales per season during the past 4
years:

Sandwich Sales (1,000s)/Year

Season 1 2 3 4
Fall 42.7 44.3 45.7 40.6
Winter 36.9 42.7 34.8 41.5
Spring 51.3 55.6 49.3 47.3
Summer 62.9 64.8 71.2 74.5

Develop a seasonally adjusted forecast model for these sandwich sales data. Forecast demand
for each season for year 5 by using a linear trend line estimate for sales in year 5. Do the data
appear to have a seasonal pattern?

Question 42
Aztec Industries has developed a forecasting model that was used to forecast during a 10-month
period. The forecasts and actual demand were as follows:

Month Actual Demand Forecast Demand

1 160 170
2 150 165
3 175 157
4 200 166
5 190 183
6 220 186
7 205 203
8 210 204
9 200 207
10 220 203

a. Measure the accuracy of the forecast by using MAD, MAPD, and cumulative error.
b. Does the forecast method appear to be accurate?

3|Page
Question 43
The owner of a small hardware store has noted a sales pattern for window locks that seems to
parallel the number of break-ins reported each week in the newspaper. The data are:

Sales: 46 18 20 22 27 34 14 37 30
Break-ins: 9 3 3 5 4 7 2 6 4

a. Plot the data to determine which type of equation, linear or nonlinear, is appropriate.
b. Obtain a regression equation for the data.
c. Estimate average sales when the number of break-ins is five.

Question 44
Given the demand data that follow, prepare a naive forecast for periods 2 through 10. Then
determine each forecast error, and use those values to obtain 2 s control limits. If demand in
the next two periods turns out to be 125 and 130, can you conclude that the forecasts are in
control?

Period: 1 2 3 4 5 6 7 8 9 10
Demand: 118 117 120 119 126 122 117 123 121 124

4|Page