Question

Problem 1: An organization is considering to generate forecast for April using exponential smoothing method (smoothing constant α =0.3) and the 2-period moving average technique. The actual sales are given in the table for January, February, March. The forecast for January using exponential smoothing method and the forecast for January and February using 2-period moving average technique are provided as well:

Period	Actual sales	Forecast using Exponential Smoothing with α =0.3	Forecast using Simple 2-Period Moving Average
Jan	50	60	40
Feb	80		74
Mar	70		?
Apr		?	?

16. The forecast for April using exponential smoothing method with α =0.3 is 65.73

True

False

17. Using the 2-period moving average method, the forecast for March is 65 and the forecast for April is 75

True

False

18. If the actual sales of April is 45, the organization would prefer the exponential smoothing over the 2-period moving average technique according to MAD

True

False

19. The MSE for the 2-period moving average technique is 270.8 if the actual sales of April is 45

True

False

Answer 1

Answer 16: True

Explanation:

· the formula to be used in Simple Exponential smoothing is

Ft+1= alpha*At + (1-alpha) Ft

At means Actual demand of t'th period, if you want to find out the Forecast through exponential smoothing= forecast of 3rd period = alpha*actual demand of 2nd period +(1-alpha) *forecast demand of 2nd period

· remember forecast of 1st period is 60, alpha= 0.3

Period, t	Actual , At	Ft, Exponential Forecast
1	50	60.00
2	80	57.00
3	70	63.90
4		65.73

Answer 17: True

Explanation:

• Forecast of a period with n period moving average = average of last n periods demand

Period, t	Actual , At	3-period moving average forecast,
1	50
2	80
3	70	65.00
4		75.00

Answer 18: True

Explanation: MAD value is less in 2 month moving average

Period, t	Actual , At	3 period moving average forecast,	Absolute deviation= |Forecast - Actual|	squared deviation= (absolute deviation)^2
1	50	40	10.00	100.0
2	80	74	6.00	36.0
3	70	65.00	5.00	25.0
4	45	75.00	30.00	900.0
			12.75	265.25
			MAD	MSE

Period, t	Actual , At	Ft, Exponential Forecast	Absolute deviation= |Forecast - Actual|
1	50	60.00	10.00
2	80	57.00	23.00
3	70	63.90	6.10
4	45	65.73	20.73
			14.96
			MAD

Answer 19: False

Explanation: MSE is 265.25