Question

In: Economics

The sales of Cool-Man air conditioners have grown steadily during the past six years as shown...

The sales of Cool-Man air conditioners have grown steadily during the past six years as shown on the table below.

Year Sales
1 450
2 495
3 518
4 563
5 584
6 592

(a) Provide a forecast by using a 3-year weighted moving average technique with weights 4, 2, and 1 (4 = most recent).

(b) Forecast sales using a 2-year moving average technique.

(c ) What is the MSE from the 2-year moving average?

Show work please

Solutions

Expert Solution

a. Weighted moving average method

Sum of weights = 4+2+1 = 7

Year Sales 3-year weighted moving average 3-year weighted moving average
1 450
2 495
3 518
4 563 ((518*4)+(495*2)+(450*1))/7 501.714
5 584 ((563*4)+(518*2)+(495*1))/7 540.429
6 592 ((584*4)+(563*2)+(518*1))/7 568.571

b. 2-year moving average method

Year Sales 2-year moving average method 2-year moving average method
1 450
2 495
3 518 (450+495)/2 472.5
4 563 (495+518)/2 506.5
5 584 (518+563)/2 540.5
6 592 (563+584)/2 573.5

c. MSE for 2-year moving average method

Year Sales 2-year moving average method 2-year moving average method Error Squared Error
1 450
2 495
3 518 (450+495)/2 472.5 45.5 2070.25
4 563 (495+518)/2 506.5 56.5 3192.25
5 584 (518+563)/2 540.5 43.5 1892.25
6 592 (563+584)/2 573.5 18.5 342.25
MSE 1874.25

Rahul Sunny answered 3 years ago
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