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Forecasting
CHAPTER 3
FORECASTING
PROBLEMS
P1.
The data below consist of the closing price of the common stock of the American Telephone and
Telegraph Corporation on 10 recent trading days.
Time(t
)
Price
Time(t)
Price
1
$24.10
6
$22.73
2
23.80
7
22.60
3
23.39
8
21.76
4
22.90
9
22.14
5
22.10
10
21.69
a.
Using a fiveperiod moving average, forecast the price of the stock for period 10.
b.
What is the error of the forecast in #1a?
c.
Using a fiveperiod moving average, forecast the price of the stock for period 11.
P2.
A product is manufactured in distinct batches of various sizes.
The cost accountant wished to
obtain an equation to use for estimating the cost of a batch.
He obtained data on a number of
batches, consisting of the size of the batch, measured in number of pieces, and the total cost of the
batch, consisting of the setup cost and the variable costs of labor, material, etc.
Costs are stated
in thousands of dollars.
Size of
Cost of
Batch
Batch
20
$1.4
30
3.4
40
4.1
50
3.8
70
6.7
80
6.6
100
7.8
120
10.4
150
11.7
a.
Which is the dependent variable?
The independent variable?
b.
Draw the scatterplot of this data.
Does a straight line look like a reasonable fit?
c.
Obtain ∑
x
2
, ∑xy, and ∑
y
2
.
d.
What is the value of the slope of the regression line that best fits this data?
e.
What is the interpretation of the slope?
f.
What is the value of the y intercept?
g.
What is the interpretation of the y intercept?
1
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h.
Estimate the cost of a batch of 125 pieces.
i.
What is the value of the coefficient of correlation?
Does it appear to indicate a high degree of
association between the size of the batch and the cost?
j.
What is the value of
r
2
?
P3. The president of the Rich and Greene College of Business Administration wishes to forecast the
enrollment for next fall.
The enrollment is measured in Full Time Equivalents (FTE), which
represent the number of fulltime students, which is equivalent to the existing mixture of fulltime
and parttime students.
Data representing the fall enrollment for the past ten years is given
below:
time(t
)
Enrollmen
t
1
907
2
981
3
1014
4
1015
5
1050
6
1071
7
1123
8
1118
9
1175
10
1216
a.
Draw a scatterplot.
Does the data appear to contain a linear trend?
b.
Obtain the ∑
t
, ∑
y
, and ∑
ty
.
c.
What is the value of the slope?
d.
What is the interpretation of the slope?
e.
What is the value of the y intercept?
a.
What is the interpretation of the y intercept?
b.
Forecast the enrollment for next fall.
P4.
The table below contains data on the monthly amount, in millions of dollars, which was spent by
"leading national advertisers" for advertising apparel and accessories in magazines, in four recent
years.
Year
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 Spring '08
 WILLIAMCOSGROVE

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