Forecasting

1. Y = 548 + 13.5X, where Y = sales in thousands of dollars, and X = advertising

expenditures in thousands of dollars. Find the forecast when advertising expenditures are $5,000.

  1. $68,048
  2. $265,500
  3. $465,500
  4. $615,500
  5. $1,178,480

2. The “Delphi” Method of forecasting is a method that achieves a consensus among experts while eliminating factors of group dynamics.

a.  True

b.  False

3. A problem with exponential smoothing models is that a great deal of data must be stored in some way in order to calculate the forecast.

a.  True

b.  False

4. For the following set of forecasts (17, 20, 25, 31, 39) and actual values (19, 24, 28, 32, 38), calculate the MAD.

a.  2.2

b.  2.5

c.  2.8

d.  3.1

e.  3.4

5. If you wanted to obtain a forecast of the number of personal computers sold in the United States in the year 2034, you would most likely use a qualitative forecasting technique.

a.  True

b.  False

6. For a causal model to be useful, either the independent variables must be known in advance or it must be possible to forecast them more easily than the dependent variable.

a.  True

b.  False

7. If the MAD is equal to 3.0, then the MAPE is equal to:

a.  -3.0

b.  3.0

c.  9.0

d.  9.5

e.  The MAPE cannot be calculated from the MAD.

8. Three forecasting models, all using the same data set, are being compared using their MAD values. The MAD value for Model X is 25.6; Model Y is 20.4; Model Z is 15.2. Which forecasting model is considered the best?

a.  Model X

b.  Model Y

c.  Model Z

d.  Additional information is needed.

e.  The MAD cannot be used to determine which model is best.

9. The existence of a mathematical relationship between two quantities implies that one is a “cause” and the other “effect.”

a.  True

b.  False

10. Increasing the number of periods in a moving average does not necessarily increase the accuracy of the forecast.

a.  True

b.  False

11. The sales manager had predicted, before the business started, that sales in year 1 would be 410 air conditioners. Using exponential smoothing with a weight of α = 0.30, develop the forecast for year 3.

Year / Sales (in units) / Forecast
1 / 450 / 410
2 / 475
3 / 518

a.  410.0

b.  437.9

c.  450.0

d.  462.5

e.  507.8

12. Data collected on the annual demand for 50-pound fertilizer at Pikes Garden Supply is shown below (in 1000’s of bags). Find the forecast for year 6 using a three-year moving average approach.

Year / Demand / Forecast
1 / 5
2 / 7
3 / 4
4 / 8
5 / 8
6 / 10
7 / 9
8 / 12

a.  6.00

b.  6.33

c.  6.67

d.  8.66

e.  10.00

13 When a=1.0, simple exponential smoothing will produce a naïve forecast.

a.  True

b.  False

14 In the Delphi method, one of the problems that must be managed is the clash of personalities of multiple experts.

c.  True

d.  False

15.  If one is using an exponential smoothing model to predict y-hat, one must input (or have previously stored) the value for a and all previously observed values of y.

a.  True

b.  False

16.  Sam Dilligaf is trying to forecast sales for his store, Sam’s Sporting Supermart. Sam's first try was with Simple Exponential Smoothing, using a = 0.75. Unfortunately, his dog chewed his worksheet. (Even adults have trouble with dogs.) Please help him by filling in the cells indicated by a ¨with a label, correct values, or correct Excel formulas. If you use copyable formulas, you may indicate copying where appropriate. Darkly shaded cells should remain empty; others require a number, a formula, or a label as appropriate. (For Bias and MAD, use formulas only.)

A / B / C / D / E / F
1 / Year / Quarter / Enroll / Forecast / ¨ / Abs(error)
2 / 1997 / 1 / 313 / 313
3 / 2 / 285 / 313 / -28 / 28
4 / 3 / 312 / 292 / 20 / 20
5 / 4 / 339 / 307 / 32 / 32
6 / 1998 / 1 / 359 / 331 / 28 / 28
7 / 2 / 320 / ¨ / ¨ / ¨
8 / 3 / 356 / ¨ / ¨ / 28
9 / 4 / 385 / 349 / 36 / 36
10 / 1999 / 1 / 396 / ¨ / ¨ / ¨
11 / 2 / 367 / ¨ / ¨ / 24
12 / 3 / 397 / 373 / 24 / 24
13 / 4 / 423 / 391 / 32 / 32
14 / 2000 / 1 / ¨
15 / Bias = / ¨
16 / Alpha = / 0.75 / MAD = / ¨

17 If actual sales are 130 units and the seasonal index for this time period is 1.2, find the deseasonalized sales for this period.

a.  144

b.  121.2

c.  108.3

d.  118.8

e.  121.2

18 If three of the quarterly seasonal indices for a set of data are 0.7, 0.8, and 1.1, then the fourth seasonal index is equal to 1.2

a.  True

b.  False