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Practical Questions-Week 2 With Solution

Seasonal indices: Winter: 4,500/22,000 = 0.2045 Spring: 6,000/22,000 = 0.2727 Summer: 7,000/22,000 = 0.3182 Fall: 2,500/22,000 = 0.1136 Forecast annual demand for 2019 = 5,600 Spring seasonal index = 0.2727 Spring demand for 2019 = 5,600 * 0.2727 = 1,525 Therefore, based on the multiplicative seasonal model, the forecasted demand for Mark's canoes in the spring of 2019 is 1,525 canoes.

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199 views

Practical Questions-Week 2 With Solution

Seasonal indices: Winter: 4,500/22,000 = 0.2045 Spring: 6,000/22,000 = 0.2727 Summer: 7,000/22,000 = 0.3182 Fall: 2,500/22,000 = 0.1136 Forecast annual demand for 2019 = 5,600 Spring seasonal index = 0.2727 Spring demand for 2019 = 5,600 * 0.2727 = 1,525 Therefore, based on the multiplicative seasonal model, the forecasted demand for Mark's canoes in the spring of 2019 is 1,525 canoes.

Uploaded by

Keeran
Copyright
© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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Solutions

Forecasting

1- The monthly sales for Telco Batteries, Inc., were as follows:

Month Sales
January 20
February 21
March 15
April 14
May 13
June 16
July 17
August 18
September 20
October 20
November 21
December 23

a) Forecast January sales using each of the following:


i. Naive method.
ii. A three-month moving average.
iii. A six-month weighted average using 0.1, 0.1, 0.1, 0.2, 0.2, and 0.3, with the heaviest
weights applied to the most recent months.
iv. Exponential smoothing using an α=0.3 and a September forecast of 18.
v. A trend projection
vi. Plot the monthly sales data and trend line.
b) With the data given, which method would allow you to forecast next March’s sales?

Solutions:

(a) [i] Naive The coming January = December = 23

[ii] 3-month moving   (20 + 21 + 23)/3 = 21.33

[iii] 6-month weighted [(0.1 × 17) + (.1 × 18)


 + (0.1 × 20) + (0.2 × 20)
    + (0.2 × 21) + (0.3 × 23)]/1.0
= 20.6

[iv] Exponential smoothing with alpha = 0.3


[v] Trend: 

Y Sales X Period X2 XY
January 20 1 1 20
February 21 2 4 42
March 15 3 9 45
April 14 4 16 56
May 13 5 25 65
June 16 6 36 96
July 17 7 49 119
August 18 8 64 144
September 20 9 81 180
October 20 10 100 200
November 21 11 121 231
December 23 12 144 276
Sum    218 78 650 1,474
Average   18.2 6.5

Forecast = 15.73 + .38(13) = 20.67, where next January is the 13th month.


[vi] 
(b) Only trend provides an equation that can extend beyond one month

2- Sales of Chevrolet’s popular Camaro grew steadily at auto dealership in Alberta during five
years (see table below). The sales manager had predicted in 2013 that 2014 sales would be
410 Camaros.
a) Using exponential smoothing with a weight of α = 0.30, develop forecast for 2015
through 2019.

Year Sales Forecast


2014 450 410
2015 495
2016 518
2017 563
2018 584
2019 ?

b) Use a 3-year moving average to forecast the sales of Chevrolet Camaros in Alberta through
2016. What is the MAD?

Solutions:

(a) 

Exponential smoothing,  = 0.3:


Exponential
Year Demand Smoothing  = 0.9
2014 450 410
2015 495 410 + 0.3(450–410) = 422
2016 518 422 + 0.3(495–422) = 443.9 (b)
2017 563 443.9 + 0.3(518–443.9) = 466.13
2018 584 466.13 + 0.3(563-466.13) = 495.191
2019 ? 495.191+ 0.3(584–495.191) = 521.84
Forecast 3-Year Absolute
Year Sales Moving Average Deviation
2014 450
2015 495
2016 518
2017 563 (450 + 495 + 518)/3 = 487.7 75.3
2018 584 (495 + 518 + 563)/3 = 525.3 58.7
2019 (518 + 563 + 584)/3 = 555.0
 = 134

3.The following gives the number of accidents that occurred on a section of the Trans-Canada
Highway during the past four months:

Month Number of Accidents


January 30
February 40
March 60
April 90

Forecast the number of accidents that will occur in May, using least squares regression to
derive a trend equation.

Solutions:
 

Number of
Accidents
Month (y) x xy x2
January 30 1 30 1
February 40 2 80 4
March 60 3 180 9
April 90 4 360 16
 Totals 220 10 65 30
0
 Averages = 55 = 2.5
The regression line is y = 5 + 20x. The forecast for May (x = 5) is y = 5 + 20(5) = 105.

4. Mark Cotteleer owns a company that manufactures canoes. Actual demand for Mark’s
Canoes during each season in 2015 through 2018 was as follows:

Year
Season 2015 2016 2017 2018
Winter 1400 1200 1000 900
Spring 1500 1400 1600 1500
Summer 1000 2100 2000 1900
Fall 600 750 650 500

Mark has forecasted that annual demand for his canoes in 2019 will equal 5600 canoes. Based on
this data and the multiplicative seasonal model, what will the demand level be for Mark’s canoes
in the spring of 2019?

Solution:

Year Winter Spring Summer Fall

1 1,400 1,500 1,000 600


2 1,200 1,400 2,100 750
3 1,000 1,600 2,000 650
4 900 1,500 1,900 500
4,500 6,000 7,000 2,500

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