Suppose you (or your group) are the manager of a company trying to determine what
forecasting method to use. Based upon the following historical data, calculate the
following forecasts for each given forecasting method and then choose the best one to do
the forecasts for the future.
Actual
Month
Demand
1
63
2
65
3
68
4
70
5
72
6
75
a.
Calculate the simple 3-month moving average forecast for periods 4-6.
(5 points)
b.
Calculate the weighted 3-month moving average using weights of 0.50, 0.30, and
0.20 for periods 4-6.
(5 points)
c.
Calculate the exponential smoothing forecast for periods 2-6 using an initial forecast
(F
1
) 62, and an
of 0.30.
(10 points)
d.
Calculate the double exponential smoothing forecast for periods 2-6 using an initial
trend forecast (T
1
) of 2.0, and initial exponential smoothing forecast (S
1
) of 60 an
of 0.30 and a
of 0.30.
(15 points)
e.
Calculate the Mean Absolute Deviation (MAD) for the forecasts made by each
technique in periods 4-6.
Which forecasting method do you prefer? Using your
preferred technique forecast the demands for the following 2 months (months 7-8).
(15 points)

Q3.
(Total 25 points)
Goodyear Tire and Rubber Company is the ninth largest tire manufacturer in the world.
Here are the sales revenues for 2012 through 2016:
Year
Revenue (millions)
2012
$3,889.9
2013
4,066.4
2014
4,535.6
2015
4,731.8
2016
4,498.7
a.
When might a manager prefer linear trend technique to simple moving
average technique? Explain your answer.
(5 points)
b. Based on MAD for 2014-2016, which method (linear-trend or double exponential
smoothing method with
= 0.4 and
= 0.2 (start with initial estimates S
2012
=
$4,867.90 and T
2012
= $201.5 for the year 2012)) provides the better forecasts?
Explain.
Forecast the demand for 2017 and 2018 based on your preferred method
(20 points)

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