Question
In: Finance
1. Data collected on the yearly demand for 50-pound bags of fertilizer at Wallace Garden Supply...
1. Data collected on the yearly demand for 50-pound bags of fertilizer at Wallace Garden Supply are shown in the following table. Develop a three-year moving average to forecast sales. Then estimate demand again with a weighted moving average in which sales in the most recent year are giveo9n a weight of 2 and sales in the other two years are each given a weight of 1. Which method do you think is best? Year Demand for Fertilizer (1,000s of bags) 1 4 2 6 3 4 4 5 5 10 6 8 7 7 8 9 9 12 10 14 11 15
Solutions
Expert Solution
3-year weighted moving average method is best among the two methods because it results in lower RMSE (Root Mean Square Error).
| Year | Demand | 3-year moving average | Error Squared | 3-year weighted moving average | Error Squared | |
| 1 | 4 | |||||
| 2 | 6 | |||||
| 3 | 4 | 4.67 | 0.44 | 4.5 | 0.25 | |
| 4 | 5 | 5.00 | 0.00 | 5 | 0 | |
| 5 | 10 | 6.33 | 13.44 | 7.25 | 7.5625 | |
| 6 | 8 | 7.67 | 0.11 | 7.75 | 0.0625 | |
| 7 | 7 | 8.33 | 1.78 | 8 | 1 | |
| 8 | 9 | 8.00 | 1.00 | 8.25 | 0.5625 | |
| 9 | 12 | 9.33 | 7.11 | 10 | 4 | |
| 10 | 14 | 11.67 | 5.44 | 12.25 | 3.0625 | |
| 11 | 15 | 13.67 | 1.78 | 14 | 1 | |
| RMSE = | 5.58 | 4.18 |
Please do rate me and mention doubts, if any, in the comments section.
jeff jeffy answered 1 year agoRelated Solutions
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