Question

Forecasting

Annual sales of product from XYZ corporation have been recorded as follows:

Year	Sales (000 units)		Year	Sales (000 units)
1	220		8	360
2	245		9	400
3	280		10	380
4	275		11	420
5	300		12	450
6	310		13	460
7	350		14	475

Management is interested in implementing a new forecasting system and investigating the following forecasting methods as possibilities:

            Simple moving average, Weighted moving average, Simple Exponential Smoothing, Regression.

a.   Choose two of these methods and calculate forecasts for Year 15

If you use Exponential Smoothing, begin with the assumption the Forecast for Year 12 was 435 (choose your own alpha)

b.   Present your forecast results

c.   Explain why each of your chosen methods is appropriate for the data and time frame given

That's all the information provided by the professor. I'll update the question if further conditions are given, but that's all I have so far.

Answer 1

The Simple Moving average with average taken for a period of 3 months is as shown-

The Weighted Moving average with weights of 0.5 to most recent month, 0.35 to second most recent and 0.15 to third most recent month is as shown-

The regression forcasting can be as shown-

We can see that the Mean Absolute Deviation and Mean Absolute Error Percentage decreases from Simple Moving Average to Weighted Moving Average to Regression method and hence, choosing Regression method could be concluded as the most appropriate forecasting method.

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