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Exam 3: Forecasting

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Question 71

True/False

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Forecasts for groups of items tend to be less accurate than forecasts for individual items because forecasts for individual items don't include as many influencing factors.

A) True
B) False

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Question 72

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Averaging techniques are useful for:

A) distinguishing between random and nonrandom variations.
B) smoothing out fluctuations in time series.
C) eliminating historical data.
D) providing accuracy in forecasts.
E) average people.

F) A) and B)
G) A) and C)

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Question 73

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Professor Very Busy needs to allocate time next week to include time for office hours. He needs to forecast the number of students who will seek appointments. He has gathered the following data: $\begin{array} { l l } \text { Week } & \text { \# Students } \\\hline 6 \text { weeks ago } & 83 \\5 \text { weeks ago } & 110 \\4 \text { weeks ago } & 95 \\3 \text { weeks ago } & 80 \\2 \text { weeks ago } & 65 \\\text { Last week } & 50\end{array}$ What is this week's forecast using a three-week simple moving average?

Which of the following smoothing constants would make an exponential smoothing forecast equivalent to a naive forecast?

The mean absolute deviation is used to:

Forecasting techniques generally assume an existing causal system that will continue to exist in the future.

Develop a forecast for the next period, given the data below, using a three-period moving average. $\begin{array} { l l } \text { Period } & \text { Demand } \\\hline 1 & 19 \\2 & 20 \\3 & 18 \\4 & 19 \\5 & 17\end{array}$

Minimizing the sum of the squared deviations around the line is called:

Which term most closely relates to associative forecasting techniques?

Accuracy in forecasting can be measured by:

In exponential smoothing, an alpha of 1.0 will generate the same forecast that a naive forecast would yield.

Which of the following changes would tend to shorten the time frame for short-term forecasting?

Which of the following is the most valuable piece of information the sales force can bring into forecasting situations?

A manager wants to choose one of two forecasting alternatives. Each alternative was tested using historical data. The resulting forecast errors for the two are shown in the table. Analyze the data and recommend a course of action to the manager. $\begin{array} { l r r r r r r r r r } \text { Period (t) } & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 \\\text { Alt. \#1 } & 3 & - 2 & 0 & 2 & 1 & - 2 & 2 & - 1 & 2 \\\text { Alt.\#2 } & 4 & 3 & - 3 & - 1 & 1 & - 1 & 0 & 1 & 0\end{array}$

An advantage of trend-adjusted exponential smoothing over the linear trend equation is its ability to adjust over time to changes in the trend.

Organizations that are capable of responding quickly to changing requirements can use a shorter forecast horizon and therefore benefit from more accurate forecasts.

The president of State University wants to forecast student enrollments for this academic year based on the following historical data: $\begin{array} { l l } \text { Year } & \text { Enrollments } \\\hline \text { 5 years ago } & 15,000 \\4 \text { years ago } & 16,000 \\\text { 3 years ago } & 18,000 \\2 \text { years ago } & 20,000 \\\text { Last year } & 21,000\end{array}$ What is the forecast for this year using trend-adjusted (double) smoothing with alpha = .05 and beta = .3, if the forecast for last year was 21,000, the forecast for two years ago was 19,000, and the trend estimate for last year's forecast was 1,500?

MAD is equal to the square root of MSE, which is why we calculate the easier MSE and then calculate the more difficult MAD.

A new car dealer has been using exponential smoothing with an alpha of .2 to forecast weekly new car sales. Given the data below, would a naive forecast have provided greater accuracy? Explain. Assume an initial exponential forecast of 60 units in period 2 . $\begin{array} { l l } \text { Period } & \text { Demand } \\\hline 1 & 57 \\2 & 62 \\3 & 58 \\4 & 60 \\5 & 60 \\6 & 56\end{array}$

The two general approaches to forecasting are: