Cabico, Camille R.

Module 4: Project Management

BS ENTREP 3 Assignment

1. Identify one area on your field of specialization, on which you can probably utilize the
full potential of forecasting and explain how it can make things work done even better.

- Forecasting as an Entrepreneur to an organization helps to determine how many

employees will be needed in the future to meet its strategic goals. Based on the
calculative forecasting achieves the objectives on how business strategy will affect to the
workforce inside the organization.

2. Sales (units) of Toyota `s Popular Vios have grown steadily at auto dealership in Nueva
Ecija during the past 5 years. Use the following forecast method to predict the sale for 6 th
year:

A. A Naïve method.

Year Sales Forecast

1 450
2 495 450
3 518 495
4 563 518
5 584 563
6 ? 584

B. A 2-Year Moving Average.

Year Sales Forecast

1 450
2 495
3 518 (495+450)/2= 472.5
4 563 (518+495)/2= 506.5
5 584 (563+518)/2= 540.5
6 ? (584+563)/2= 573.5

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 C. A Weighted Moving Average, using 5.0 & 3.0 with the heaviest weight
applied to the most recent month.

Year Sales Forecast

1 450
2 495
3 518 [5.0(495) +3.0(450)]/8= 478.125
4 563 [5.0(518) +3.0(495)]/8= 509.375
5 584 [5.0(563) +3.0(518)]/8= 546.125
6 ? [5.0(584) +3.0(563)]/8= 576.125

D. Exponential smoothing using an α=0.30 and 410-unit sales in the 1st year.

Year Sales Forecast (0.30)

1 450 410
2 495 410+0.30 (450-410) = 422
3 518 422+0.30 (495-422) = 443.9
4 563 443.9+0.30 (518-443.9) = 466.13
5 584 466.13+0.30 (563-466.13) = 495.191
6 ? 495.191+0.30 (584-495.191) = 521.83

E. Trend Adjusted exponential smoothing using α=0.10 and ẞ=0.2. Assume that
the initial forecast for 1st year was 410-unit sales and the trend over that
period was 2 units.

SOLUTION:

Smoothed Forecast Average Smoothed Trend Forecast including

( F t) (T t) Trend
(FIT)
0.10(450) +(1-0.10) (410+2) 0.2(415.8-410) +(1-0.2)2 415.8+2.76
0.10(495) +(1-0.10) (415.8+2.76) 0.2(426.20-415.8) +(1-0.2)2.76 426.20+4.29
0.10(518) +(1-0.10) (426.20+4.29) 0.2(439.24-426.20) +(1-0.2)4.29 439.24+6.04
0.10(563) +(1-0.10) (439.24+6.04) 0.2(457.05-439.24) +(1-0.2)6.04 457.05+8.39
0.10(584) +(1-0.10) (457.05+8.39) 0.2(477.30-457.05) +(1-0.2)8.39 477.30+10.76
Year Sales Smoothed Forecast Smoothed Forecast including
Average Trend Trend
( F t) (T t) (FIT)

1 450 410 2 412

2 495 415.8 2.76 418.56

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 3 518 426.20 4.29 430.49
4 563 439.24 6.04 445.28
5 584 457.05 8.39 465.44
6 ? 477.30 10.76 488.06

F. A Trend Projection.

Year (x) Sales (y) x2 xy

1 450 1 450
2 495 4 990
3 518 9 1554
4 563 16 2252
5 584 25 2920
∑x= 15 ∑y=2610 ∑ x 2=¿55 ∑xy=8166

15 2610 8166−5 ( 3 )( 522 )

x̅= ȳ= b= a=522-(33.6)3
5 5 55−5 ( 3 2)
=3 =522 =33.6 =421.2

Trend Projection
Ŷ=421.2+ (33.6) (x)

G. Forecast method will you recommend to be used between Naïve and

Exponential Smoothing? Base your answer from the results of MAD, MSE, and
MAPE.
Naïve:

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 Year Sales Naïve MAD MSE MAPE
Forecast (Forecast error)
1 450
2 495 450 495-450= 45 2025 9.09%
3 518 495 518-495= 23 529 4.44%
4 563 518 563-518= 45 2025 7.99%
5 584 568 584-563= 21 441 3.60%
6 ?
Total 134 5020 25.12%

134 5020 25.12

MAD= MSE= MAPE=
4 4 4
= 33.5 = 1255 = 6.28%

Exponential Smoothing:

Year Sales Forecast (0.30) MAD MSE MAPE

(Forecast error)
1 450 410 450-410= 40 1600 8.89%
2 495 422 495-422= 73 5329 14.75%
3 518 443.9 518-443.9= 74.1 5490.81 14.31%
4 563 466.13 563-466.13= 96.87 9383.80 17.21%
5 584 495.191 584-495.191= 88.81 7887.22 15.21%
6 ?
Total 74.56 29690.83 70.37%

372.78 29690.83 70.36

MAD= MSE= MAPE=
5 5 5
=74.56 =5938.17 =14.07%
Based from the result of both MAD, MSE, and MAPE of Naïve and Exponential Smoothing, I
rather choose Naïve because of the small value which has an accurate result of forecasting.

3. Popey owns a company that manufactures sailboats. Actual demand for Popey`s sailboats
during each of the past four seasons was as indicated in the table. He forecasted that
annual demand for his sailboats in year 5 will equal 5,600 sailboats. Based on this data
and the multiplicative seasonal model, what will be the demand level be for Popey`s
sailboats?

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Table 2. Demand of Sailboats

Season Year Average Average Seasonal Forecast

1 2 3 4 Period Demand Index
Demand
Winter 1,400 1,200 1,000 900 1125 1250 0.9 1260
Spring 1,500 1,400 1,600 1,500 1500 1250 1.2 1680
Summer 1,000 2,100 2,000 1,900 1750 1250 1.4 1960
Fall 600 750 650 500 625 1250 0.5 700

4. KaratWorld runs a Philippine high-end jewelry shop. They advertise weekly in television
and is thinking of increasing their ad budget. Before doing so, they decided to evaluate
the past effectiveness of these ads. Five weeks are sampled, and the data are shown in the
table below. Develop a regression model to help KaratWorld evaluate their advertising.

Table 3. KaratWorld Ad Budget

Ad Budget (x) Sales(y) x2 xy y2

500 11,000 250,000 5500,000 121000000
300 6,000 90,000 1800,000 36000000
700 10,000 490,000 7000,000 100000000
200 6,000 40,000 1200,000 36000000
800 12,000 640,000 9600,000 144000000
∑x=2500 ∑y=45,000 ∑ x 2=1 510,000 ∑xy=25 ∑ y 2=437000000
100,000

2500 45000 25100,000−(5)(500)(9000)

x̅= ȳ= b= a= 9000-10(500)
5 5 1510000−( 5) ¿ ¿

= 500 =9000 =10 =4000

Regression:
Ŷ=a+bx
= 4000+10(x)

Standard Deviation:

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 437000000−( 400 ) ( 2500 )−( 10 ) ( 25100000 )
S x. y =
√ 5−2

437000000−1000000−251000000
=
√
=√ 61666666.67
3

=7852.81

5. Using the data solved in Problem 3, find the coefficient correlation. Determine the
strength and direction of the value of r.

Ad Budget, in Sales, in x2 y2 xy
hundreds (x) thousands (y)
5 11 25 121 55
3 6 9 36 18
7 10 49 100 70
2 6 4 36 12
8 12 64 144 96
2
∑x=25 ∑y=45 ∑ x =151 ∑ y 2=437 ∑xy=251

(5) (251 ) −(25)(45)

r= 2 2
√[(5)¿ ( 151 )−( 25 ) ][ ( 5 ) ( 437 )−( 45 ) ]¿
1255−1125
= ¿
√(755−626)(2185)−2025 ¿
130
=
√(130)(160)
130
=
√ 20,800
130
=
144.22
=0.901

 Very weak correlation= 0 – 0.19

 Weak correlation= 0.2 – 0.39
 Moderate correlation= 0.4 – 0.59
 Strong correlation= 0.6 – 0.79

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  Very strong correlation= 0.8- 1

Answer: There is a direct relationship which has result of very strong correlation.

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