Question

In: Statistics and Probability

These data show the number of gallons of gasoline sold by a gasoline distributor in Bennington,...

These data show the number of gallons of gasoline sold by a gasoline distributor in Bennington, Vermont, over the past 12 weeks.

Week Sales (1,000s
of gallons)
1 17
2 21
3 19
4 23
5 18
6 16
7 20
8 18
9 22
10 20
11 15
12 22

(a)

Compute four-week and five-week moving averages for the time series.

Week Time Series
Value
4-Week
Moving
Average
Forecast
5-Week
Moving
Average
Forecast
1 17
2 21
3 19
4 23
5 18 1
6 16 2 3
7 20 4 5
8 18 6 7
9 22 8 9
10 20 10 11
11 15 12 13
12 22 14 15

(b)

Compute the MSE for the four-week moving average forecasts. (Round your answer to two decimal places.)

Compute the MSE for the five-week moving average forecasts. (Round your answer to two decimal places.)

(c)

What appears to be the best number of weeks of past data (three, four, or five) to use in the moving average computation? MSE for the three-week moving average is 10.22.

Three weeks appears to be best, because the three-week moving average provides the smallest MSE. Three weeks appears to be best, because the three-week moving average provides the largest MSE.   

Four weeks appears to be best, because the four-week moving average provides the smallest MSE. Five weeks appears to be best, because the five-week moving average provides the smallest MSE. None appear better than the others, because they all provide the same MSE.

Solutions

Expert Solution

a)

Four-week moving average:

Week Sales Four week moving Average Error Error²
1 17 - - - -
2 21 - - - -
3 19 - - - -
4 23 - - - -
5 18 (17+21+19+23)/4 = 20.000 -2.000 4.000
6 16 (21+19+23+18)/4 = 20.250 -4.250 18.063
7 20 (19+23+18+16)/4 = 19.000 1.000 1.000
8 18 (23+18+16+20)/4 = 19.250 -1.250 1.563
9 22 (18+16+20+18)/4 = 18.000 4.000 16.000
10 20 (16+20+18+22)/4 = 19.000 1.000 1.000
11 15 (20+18+22+20)/4 = 20.000 -5.000 25.000
12 22 (18+22+20+15)/4 = 18.750 3.250 10.563
Total -3.250 77.188

Five-week moving average:

Week Sales Five week moving Average Error Error²
1 17 - - - -
2 21 - - - -
3 19 - - - -
4 23 - - - -
5 18 - - - -
6 16 (17+21+19+23+18)/5 = 19.600 -3.600 12.960
7 20 (21+19+23+18+16)/5 = 19.400 0.600 0.360
8 18 (19+23+18+16+20)/5 = 19.200 -1.200 1.440
9 22 (23+18+16+20+18)/5 = 19.000 3.000 9.000
10 20 (18+16+20+18+22)/5 = 18.800 1.200 1.440
11 15 (16+20+18+22+20)/5 = 19.200 -4.200 17.640
12 22 (20+18+22+20+15)/5 = 19.000 3.000 9.000
Total -1.200 51.840

b)

MSE for the four-week moving average forecasts = ∑(A-F)²/n = 77.188/8 = 9.65

MSE for the five-week moving average forecasts = ∑(A-F)²/n = 51.84/7 = 7.41

c)

Five weeks appears to be best, because the five-week moving average provides the smallest MSE.


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