Practice Problems

Chapter 4—Forecasting

Problem 1:
Auto sales at Carmen’s Chevrolet are shown below. Develop a 3-week moving average.

Week Auto Sales

1 8

2 10

3 9

4 11

5 10

6 13

7 -

Problem 2:
Carmen’s decides to forecast auto sales by weighting the three weeks as follows:

Weights Applied Period

3 Last week

2 Two weeks ago

1 Three weeks ago

6 Total

Problem 3:
A firm uses simple exponential smoothing with to forecast demand. The forecast for the
week of January 1 was 500 units whereas the actual demand turned out to be 450 units. Calculate
the demand forecast for the week of January 8.

Problem 4:

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Exponential smoothing is used to forecast automobile battery sales. Two values of are
examined, and Evaluate the accuracy of each smoothing constant. Which is preferable?
(Assume the forecast for January was 22 batteries.) Actual sales are given below:

Month Actual Battery Sales Forecast

January 20 22

February 21

March 15

April 14

May 13

June 16

Problem 5:
Use the sales data given below to determine: (a) the least squares trend line, and (b) the predicted
value for 2013 sales.

Year Sales (Units)

2006 100

2007 110

2008 122

2009 130

2010 139

2011 152

2012 164

To minimize computations, transform the value of x (time) to simpler numbers. In this case,
designate year 2006 as year 1, 2007 as year 2, etc.
Problem 6:
Given the forecast demand and actual demand for 10-foot fishing boats, compute the tracking
signal and MAD.

Year Forecast Demand Actual Demand

1 78 71

2
 2 75 80

3 83 101

4 84 84

5 88 60

6 85 73

Problem: 7
Over the past year Meredith and Smunt Manufacturing had annual sales of 10,000 portable water
pumps. The average quarterly sales for the past 5 years have averaged: spring 4,000, summer
3,000, fall 2,000, and winter 1,000. Compute the quarterly index.

Problem: 8
Using the data in Problem 7, Meredith and Smunt Manufacturing expects sales of pumps to grow
by 10% next year. Compute next year’s sales and the sales for each quarter.

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 ANSWERS:

Problem 1:

Week Auto Sales Three-Week Moving Average

1 8

2 10

3 9

4 11 (8 + 9 + 10) / 3 = 9

5 10 (10 + 9 + 11) / 3 = 10

6 13 (9 + 11 + 10) / 3 = 10

7 - (11 + 10 + 13) / 3 = 11 1/3

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Problem 2:

Week Auto Sales Three-Week Moving Average

1 8

2 10

3 9

4 11 [(3*9) + (2*10) + (1*8)] / 6 = 9 1/6

5 10 [(3*11) + (2*9) + (1*10)] / 6 = 10 1/6

6 13 [(3*10) + (2*11) + (1*9)] / 6 = 10 1/6

7 - [(3*13) + (2*10) + (1*11)] / 6 = 11 2/3

Problem 3:

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Problem 4:

Month Actual Rounded Absolute Rounded Absolute

Battery Forecast Deviation Forecast with Deviation
Sales with a =0.8 with a =0.8 a =0.5 with a =0.5

January 20 22 2 22 2

February 21 20 1 21 0

March 15 21 6 21 6

April 14 16 2 18 4

May 13 14 1 16 3

June 16 13 3 14.5 1.5

∑ = 15 ∑ = 16.5

2.5 2.75

Based on this analysis, a smoothing constant of a = 0.8 is preferred to that of a = 0.5 because it
has a smaller MAD.

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Problem 5:

Year Time Period Sales (Units) X2 XY

(X) (Y)

2006 1 100 1 100

2007 2 110 4 220

2008 3 122 9 366

2009 4 130 16 520

2010 5 139 25 695

2011 6 152 36 912

2012 7 164 49 1148

Therefore, the least squares trend equation is:

To project demand in 2013, we denote the year 2013 as and:

Sales in

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Problem 6:

Year Forecast Actual Error RSFE

Demand Demand

1 78 71 -7 -7

2 75 80 5 -2

3 83 101 18 16

4 84 84 0 16

5 88 60 -28 -12

6 85 73 -12 -24

Year Forecast Actual |Forecast Cumulative MAD Tracking

Demand Demand Error| Error Signal

1 78 71 7 7 7.0 -1.0

2 75 80 5 12 6.0 -0.3

3 83 101 18 30 10.0 +1.6

4 84 84 0 30 7.5 +2.1

5 88 60 28 58 11.6 -1.0

6 85 73 12 70 11.7 -2.1

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Problem 7:
Sales of 10,000 units annually divided equally over the 4 seasons is and the
seasonal index for each quarter is: spring summer fall
winter

Problem 8:
Next years sales should be 11,000 pumps Sales for each quarter should
be 1/4 of the annual sales the quarterly index.