Question

In: Finance

The following is average weekly per pound price data for apple pears in the US (from...

The following is average weekly per pound price data for apple pears in the US (from usda.gov) starting May. Your employer wants you to determine forecasted average weekly price for all the weeks starting in May.

Week of (2019 Calendar Year)

Actual ($/lb)

Naïve Previous Period ($/lb)

Moving Average ($/lb)

Weighted Moving Average ($/lb)

Exponential Smoothing ($/lb)

May 6

1.72

May 13

2.43

May 20

2.99

May 27

1.72

June 3

1.59

June 10

3.50

June 17

3.50

June 24

1.50

July 1

1.50

July 8

1.59

July 15

2.49

July 22

2.49

July 29

1.99

  1. For each period starting in May (through August 6), determine the forecasted values (round all responses to two decimal places) using:
    1. Naïve previous period
    2. Four-period moving average
    3. Four-period weighted moving average (w1=0.35, w2=0.3, w3=0.25, w4=0.10).
    4. Exponential smoothing with an α= .35. Make the assumption that the forecasted value of May 20 is equal to the actual value of May 20.

To receive any credit for filling out the above table, you must show your hand written work on attached pages. You should also double check your work using Excel (Excel for forecasting won’t be graded).

  1. For the last four periods in the month of July (includes: July 8, July 15, July 22, and July 29),
    1. calculate MAD, MSE, and MAPE (ok to use Excel here), and fill out the following table

Naïve Same Period

Four- period moving average

Weighted Moving Average

Exponential Smoothing

Error Summary

MAD ($/lb)

MSE [($/lb)2]

MAPE (%)

  1. Which forecasting technique do you recommend the company uses? Justify your response.

Solutions

Expert Solution

Ans (a) Naïve previous period = Actual Value of Previous Week

Price at any point of time Pt = P t-1

Ans (b)  

Four-period moving average = Moving Avg of Past Four Period

Price at any point of time Pt =( P t-1 + P t-2 + P t-3 + P t-4 ) / 04

Ans (c)

Four-period weighted moving average (w1=0.35, w2=0.3, w3=0.25, w4=0.10).

Price at any point of time Pt = 0.35 * P t-1 + 0.3* P t-2 + 0.25 * P t-3 + 0.1 * P t-4

Ans (d)

Exponential smoothing with an α = .35.

Here forecasted value of May 20

forecasted Price Ft =   α *  Pt-1 + (1-  α ) * Ft-1


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