Question

Solve EXACTLY 6 questions out of 10. At least 2 questions MUST be quantitative! "X" = 7, "Y" = 4:

1. QUANTITATIVE – You work for Lynn, Inc. Your boss has asked you to complete a forecast for February and March using two forecasting methods and then to evaluate the two methods to identify the “best” method. You decide to try a weighted moving average of the last two months using weights of 60% (previous month) and 40% (2 months prior). You also try exponential smoothing with an alpha constant of .34.  Complete the table by providing numbers for A, B, C, D, E, F, G, and H and calculate the MAD for each method (I and J). Which is a better forecasting method for this data? Why?

Substitute the last digit of your student number for “Y”=7. Substitute the next to last digit of your student number for "X"=4.

Month	Actual	Forecast – Weighted Average	Absolute Deviation – Weighted Average	Forecast – Exponential Smoothing (alpha = .34)	Absolute Deviation – Exponential Smoothing
November	98	Do not enter	Do not enter	Do not enter	Do not enter
December	101	Do not enter	Do not enter	Do not enter	Do not enter
January	107	Do not enter	Do not enter	102	Do not enter
February	97	A	B	C	D
March	105	E	F	G	H

MAD for Weighted Average = I

MAD for Exponential Smoothing = J

Answer 1

We will use below formulas:

2- month weighted average forecast = (Weight for previous month)* (Actual value for previous month) + (Weight for 2 months prior )* (Actual value for 2 months prior)

Exponential smoothing forecast, F(t+1) = alpha * A(t) + (1-alpha)*F(t)

where A(t) is actual value in current period, F(t) is forecast for current period.

As given, Weight for previous month = 0.6, Weight for 2 months prior= 0.4, alpha constant = 0.34

Month	Actual	Forecast – Weighted Average	Absolute Deviation – Weighted Average	Forecast – Exponential Smoothing (alpha = .34)	Absolute Deviation – Exponential Smoothing
November	98
December	101			0.34*(98)+(1-0.34)*98=98
January	107	0.6*101+0.4*98=99.8	|107-99.8| = 7.2	0.34*(101)+(1-0.34)*98=99.02	|107-99.2| = 7.8
February	97	0.6*107+0.4*101=104.6	|97-104.6)|=7.6	0.34*(107)+(1-0.34)*99.0=101.73	|97-101.73| = 4.73
March	105	0.6*97+0.4*107=101.0	|105-101|=4.0	0.34*97+(1-0.34)*101.73=100.12	|105-100.12|=4.88
MAD for Weighted Average = I			(7.2+7.6+4)/3=6.27
MAD for Exponential Smoothing = J					(7.8+4.73+4.88)/3=5.80

Hence, final solution is

A: 104.6

B: 7.6

C: 101.73

D: 4.73

E: 101.0

F: 4.0

G: 1001.2

H: 4.88

I: 6.27

J: 5.80

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