Question

Honeywell Bakery has been offering a new vegan cupcake and wants to know the demand in the future. For the past six weeks, the demand has been 60 cupcakes, 55 cupcakes, 75 cupcakes, 60 cupcakes, 80 cupcakes, and 75 cupcakes respectively. 1. a) Using a simple four-week moving average, calculate a forecast for next week. (4 points) b) If the forecast for week 6 was 85 cupcakes, then using single exponential smoothing with α=0.2, calculate a forecast for next week. (4 points) 2. a) Using simple linear regression, calculate the trend line for the historical data. X- Axis should represent the period (e.g. week 1 = 1, week 2 = 2, and so on), while the Υ axis is demand. (12 points) b) Calculate a forecast for next week. Is this forecast different from the ones calculated in 1a and 1b? If so, please explain the difference. (10 points)

Answer 1

Answer:

1-a) SImple Four-Week Moving Average =

Forecast Demand for the Next (7th Week) = (Sum of Actual Demand for Week 3 to 6) / 4

= (75 + 60 + 80 + 75) / 4

= 290 / 4

= 72.50 Cupcakes

Answer 1-b) Simple Exponential Smoothing Method =

Forecast Demand for the Next (7th Week) =

= Forecast Demand for previous(6th) Week + \alpha (Actual Demand for the previous week (6th) - Forecast Week for previous (6th) Week)

Where Forecast Demand for previous (6th) Week = 85 cupcakes

\alpha = 0.2

Actual Demand for the previous week (6th) = 75 cupcakes, and

Hence, Forecast Demand for the Next (7th Week) = 85 + 0.2 (75-85)

= 85 - 2

= 83 cupcakes

Answer 2-a)

We will determine a linear trend line for the historical data by following the steps as mentioned below:

Step 1: Let x = Independent Variable = No. of Week, and y = Dependent Variable = Demand for Cupcakes Cupcakes,

First, prepare the following table: