Question

1. National Scan, Inc., sells radio frequency inventory tags. Monthly sales for a seven-month period were as follows: Month Sales February 19

March 18

April 19

May 20

June 18

July 21

August 19

Forecast September sales volume using each of the following:

a. The naive approach.

b. A three-month moving average.

c. A weighted average using 0.70 for August, 0.20 for July, and 0.10 for June.

d. Exponential smoothing with a smoothing constant 0.30, assuming a March forecast of 19.

Answer 1

Given information:

(a) Forecast using Naive approach:

In Naive approach, the actual values of the last period are considered as the forecasted values for the present period.

Forecast sales for September = Actual sales for August

Forecast sales for September = 19

(b) 3-Month Moving Average method:

Forecast sales for September = (August sales + July sales + June sales) / 3

Forecast sales for September = (19 + 21 + 18) / 3

Forecast sales for September = 19.33

(c) Forecast using Weighted Average:

Forecast sales for September = [(August sales x weight 1) + (July sales x weight 2) + (June sales x weight 3)

Forecast sales for September = [(19 x 0.70) + (21 x 0.20) + (18 x 0.10)]

Forecast sales for September = 19.3

(d) Forecast using Exponential smoothing:

In exponential smoothing,

F(t+1) = A(t) + (1 - ) F(t)

where,

F(t+1) = Forecast for the next period

F(t) = Forecast for the present period

A(t) = Actual values for the present period

= smoothing constant

= 0.30

Forecast sales for September = 19.4