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Cha 5

This document provides sales data for Davis's Department Store over the next four quarters. It includes the initial sales estimates for each quarter as well as seasonal indices. To calculate the adjusted sales forecast, the sales estimate for each quarter is multiplied by its corresponding seasonal index. This accounts for seasonal fluctuations in demand.

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Jr Cañete
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97 views8 pages

Cha 5

This document provides sales data for Davis's Department Store over the next four quarters. It includes the initial sales estimates for each quarter as well as seasonal indices. To calculate the adjusted sales forecast, the sales estimate for each quarter is multiplied by its corresponding seasonal index. This accounts for seasonal fluctuations in demand.

Uploaded by

Jr Cañete
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Develop a four-month moving average forecast for Wallace Garden Supply and compute the MAD.

A three-month
moving average forecast was developed in the section on the moving averages in Table 5.3.

Actual
Shed Absolute
Month sales Forecast Error error
January 10
February 12
March 13
April 16
May 19 12.750 6.250 6.250
June 23 15.000 8.000 8.000
July 26 17.750 8.250 8.250
August 30 21.000 9.000 9.000
September 28 24.500 3.500 3.500
October 18 26.750 -8.750 8.750
November 16 25.500 -9.500 9.500
December 14 23.000 -9.000 9.000

Next period 19.0


MAD 7.781
Using MAD, determine whether the forecast in Problem 5-12 or the forecast in the section concerning Wallace
Garden Supply is more accurate.

Actual Shed Forecast(3- Absolute Forecast(4- Absolute


Month sales period MA) Error error period MA) Error error
January 10
February 12
March 13
April 16 11.667 4.333 4.333
May 19 13.667 5.333 5.333 12.750 6.25 6.25
June 23 16.000 7.000 7.000 15.000 8.00 8.00
July 26 19.333 6.667 6.667 17.750 8.25 8.25
August 30 22.667 7.333 7.333 21.000 9.00 9.00
September 28 26.333 1.667 1.667 24.500 3.50 3.50
October 18 28.000 -10.000 10.000 26.750 -8.75 8.75
November 16 25.333 -9.333 9.333 25.500 -9.50 9.50
December 14 20.667 -6.667 6.667 23.000 -9.00 9.00
58.333 62.25

3 month
MAD=58.33/9 6.481
4 month
MAD=62.25/8 7.78

Looking at the MAD values, it can be said that the 3 period moving average is more accurate
as it has lower MAD among the two.
Data collected on the yearly demand for 50-pound bags of fertilizer at Wallace Garden Supply are shown in
the following table. Develop a three-year moving average to forecast sales. Then estimate demand again
with a weighted moving average in which sales in the most recent year are given a weight of 2 and sales in
the other two years are each given the weight of 1. Which method do you think is best?

3 period moving averages


Absolute
Year Demand Forecast Error error
1 4
2 6
3 4
4 5 4.67 0.33 0.33
5 10 5.00 5.00 5.00
6 8 6.33 1.67 1.67
7 7 7.67 -0.67 0.67
8 9 8.33 0.67 0.67
9 12 8.00 4.00 4.00
10 14 9.33 4.67 4.67
11 15 11.67 3.33 3.33

Next period 13.67


MAD 2.54

Weighted moving averages


Actual Absolute
Year value Weights Forecast Error error
1 4 1
2 6 1
3 4 2
4 5 4.50 0.50 0.50
5 10 5.00 5.00 5.00
6 8 7.25 0.75 0.75
7 7 7.75 -0.75 0.75
8 9 8.00 1.00 1.00
9 12 8.25 3.75 3.75
10 14 10.00 4.00 4.00
11 15 12.25 2.75 2.75

Next period 14.00


MAD 2.313

Weighted moving average is slightly more accurate than 3-period moving average as MAD for Weighted
moving average is less among the two.
Sales of Cool-Man air conditioners have grown steadily during the past five years.

The sales manager had predicted, before the business started, that year 1’s sales would be 410 air
conditioners. Using the exponential smoothing with a weight of alpha = 0.30, develop forecasts for
years 2 through 6.

Absolute
Year Sales Forecast Error error
1 450 410.00
2 495 422.00 73.00 73.00
3 518 443.90 74.10 74.10
4 563 466.13 96.87 96.87
5 584 495.19 88.81 88.81

Alpha 0.3

Year 6
forecast 521.83
Using the trend projection method, develop a forecasting model for the sales of Cool-Man air conditioners (see problem 5-18).

Period Absolute
Year Sales(Y) no(X) Forecast Error error
1 450 1 454.80 -4.80 4.80
2 495 2 488.40 6.60 6.60
3 518 3 522.00 -4.00 4.00
4 563 4 555.60 7.40 7.40
5 584 5 589.20 -5.20 5.20
Average 5.6
Intercept 421.2 MAD
Slope 33.6

Trend equation: Y=421.2+33.6X


Year 6
forecast 622.8 6
ners (see problem 5-18).
Management of Davis’s Department Store has used time-series extrapolation to forecast retail sales for the next four quarters. The
sales estimates are $100,000, $120,000, $140,000, and $160,000 for the respective quarters before adjusting for seasonality.
Seasonal indices for the four quarters have been found to be 1.30, 0.90, 0.70, and 1.10, respectively. Compute a seasonalized or
adjusted sales forecast.

As the seasonal indices are already given, Adjusted sales forecast is calculated using following formula:
Ajusted sales forecast=Sales estimate*Seasonal index

Sales Seasonal Adjusted


Quarter estimates index sales forecast
1 $100,000 1.30 $130,000
2 $120,000 0.90 $108,000
3 $140,000 0.70 $98,000
4 $160,000 1.10 $176,000
ext four quarters. The
ng for seasonality.
ute a seasonalized or

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