ch08 - Chapter 8 Problem 2 Nave Method F6 = A5 = 460 Simple...

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Chapter 8 Problem 2: Naïve Method: F 6 = A 5 = 460 Simple Average: F 6 = (A 1 +A 2 +A 3 +A 4 +A 5 )/5 = (432+396+415+458+460)/5 = 432.2 3-Period Moving Average: F 6 = (A 3 +A 4 +A 5 )/3 = (415+458+460)/3 = 444.3 Problem 4: a. and b. Note: The MAD for the naïve method would be 9.6 if the first forecast were in February. Naïve Absolute Month Sales Forecast Error January 45 February 30 March 40 30 10 April 50 40 10 May 55 50 5 June 47 55 8 MAD: 8.25 2-Period Absolute Month Sales Moving Average Error January 45 February 30 March 40 37.5 2.5 April 50 35 15 May 55 45 10 June 47 52.5 5.5 MAD: 8.25 Note: The MAD for exponential smoothing would be 7.7 if the forecasts started in February. Exponential Absolute Month Sales Smoothing Error January 45 February 30 March 40 30 10 April 50 32 18 May 55 35.6 19.4 June 47 39.48 7.52 MAD: 13.73 The 2-period moving average and the naive approach provide the same MAD value. c. July forecast using naive = 47 July forecast using 2-period moving average = 51

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Problem 6: a. Forecasts using α = 0.1: Exponential Absolute Week Demand Smoothing Error 1 430 430 2 289 430 141 3 367 415.9 48.9 4 470 411.01 58.99 5 468 416.909 51.091 6 365 422.0181 57.0181 MAD: 71.4 Forecasts using α = 0.7: Exponential Absolute Week Demand Smoothing Error 1 430 430 2 289 430 141 3 367 331.3 35.7 4 470 356.29 113.71 5 468 435.887 32.113 6 365 458.3661 93.3661 MAD: 83.18 b. The answer is the same since an alpha value of 0.1 provides a better historical fit. Both data sets do not exhibit a trend and the variation in the data appears to be random.
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