Question

In: Accounting

You are hired by a Danish distributor of consumer goods, Dicgø, to improve their forecasting capabilities....

You are hired by a Danish distributor of consumer goods, Dicgø, to improve their forecasting capabilities. You are tasked with coming up with quarterly forecasts for an item that appears to have level, seasonality, and trend. While the company does have an existing Holt-Winter forecasting model, no one knows what the parameters (Alpha, Beta, or Gamma) are.

You do have some information. For example, you know that historically, the demand in each quarter follows this distribution:

- Q1 (January through March) = 60% of average quarterly demand

- Q2 (April through June) = 80% of average quarterly demand

- Q3 (July through September) = 140% of average quarterly demand

- Q4 (October through December) = 120% of average quarterly demand.

You just ran the forecast at the end of September (end of 2014Q3) and you have the following estimates:

For level: a^2014Q3 = 1050 units

For trend: b^2014Q3= 41.9 units per quarter

Q1) What is your forecast for demand for 2014Q4? In other words, what is x^2014Q3,2014Q4?

Q2) Suppose the actual demand in 2014Q4 is 1050 units. What is the lowest possible value for your estimate for level, a^2014Q4?

Q3) The model was run at the end of 2014Q4. It provided you with the most recent estimates of each pattern. The estimate for level, a^2014Q4 was 1067.8. What is the value of alpha?

Q4) The model was run at the end of 2014Q4. The estimate for trend, b^2014Q4 was found to be 39.6. What is value of beta?

Q5) The model was run at the end of 2014Q4. The estimate for seasonality, F^2014Q4 was found to be 1.189, before any normalization was done. What is the value of gamma?

Solutions

Expert Solution

(1) Forecast Demand For Q4 2014:

                      

(I)

For Level:

Demand for Q3-2014   ----------   1050 Units Per Quarter

As per above given Information, Q3 demand Is equal to 140% of Average Quarterly demand.

Avg Quarterly demand for level = 1050 Units @ 140%

                                         How many units @ 100%

                            = 1050*100/140

                              =750 Units

Q4 demand is 120% of Avg. Quarterly demand = 750*120/100

                                                                     =900 Units for Level

For Trend:

Demand for Q3-2014   ----------   41.9 Units per Quarter

As per above given Information, Q3 demand Is equal to 140% of Average Quarterly demand.

Avg Quarterly demand for level = 41.9 Units @ 140%

                                                         How many units @ 100%

                                                             =41.9*100/140

                                                             =29.92 Units

Q4 demand is 120% of Avg. Quarterly demand = 29.92*120/100

                                                                                            =35.90 Units For trend

ekkarill92 answered 1 year ago
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