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Chapter

13

Forecasting

TRUE/FALSE

1. The repeated observations of demand for a product or service in their order of occurrence form a

pattern known as a time series.

Answer: True

Reference: Demand Patterns

Difficulty: Easy

Keywords: time, series, repeated

2. One of the basic time series patterns is trend.

Answer: True

Reference: Demand Patterns

Difficulty: Easy

Keywords: time, series, pattern, trend

3. One of the basic time series patterns is random.

Answer: True

Reference: Demand Patterns

Difficulty: Easy

Keywords: time, series, pattern, random

. !andom variation is an aspect of demand that increases the accuracy of the forecast.

Answer: "a#se

Reference: Demand Patterns

Difficulty: Easy

Keywords: random, variation, accuracy

$. %&&re&ation is the act of c#usterin& severa# simi#ar products or services.

Answer: True

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: a&&re&ation, c#usterin&

). %&&re&atin& products or services toðer &enera##y decreases the forecast accuracy.

Answer: "a#se

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: a&&re&ation, forecast, accuracy

111

Chapter 13 Forecasting

*. % forecast of sa#es revenue has #itt#e va#ue.

Answer: True

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: forecast, sa#es, revenue

+. % stock,keepin& unit is an individua# item or product that has an identifyin& code and is he#d in

inventory somewhere a#on& the va#ue chain.

Answer: True

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: '-., stock,keepin&, unit

/. 0ud&ment methods of forecastin& are 1uantitative methods that use historica# data on independent

variab#es to predict demand.

Answer: "a#se

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: 2ud&ment, method, forecast, data

13. Time,series ana#ysis is a statistica# approach that re#ies heavi#y on historica# demand data to pro2ect

the future si4e of demand.

Answer: True

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: time, series, forecast

11. The causa# method of forecastin& uses historica# data on dependent variab#es such as promotiona#

campai&ns and economic conditions to predict the demand of independent variab#es such as sa#es

vo#ume.

Answer: "a#se

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: causa#, method, dependent, independent

12. Time,series ana#ysis is most often used for #on&,term forecasts.

Answer: "a#se

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: time, series, #on&,term

13. "or time hori4ons e5ceedin& two years, forecasts are usua##y deve#oped for individua# products.

Answer: "a#se

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: time, hori4on, forecast, a&&re&ate

112

Chapter 13 Forecasting

1. 'a#esforce estimates are e5treme#y usefu# for techno#o&ica# forecastin&.

Answer: "a#se

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: sa#es, force, techno#o&y, forecast

1$. Techno#o&ica# forecastin& is an app#ication of e5ecutive opinion in #i&ht of the difficu#ties in keepin&

abreast of the #atest advances in techno#o&y.

Answer: True

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: techno#o&ica#, forecastin&, e5ecutive, opinion

1). (arket research is a systematic approach to determine consumer interest by &ainin& consensus from a

&roup of e5perts whi#e maintainin& their anonymity.

Answer: "a#se

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: market, research, De#phi

1*. 0ud&ment methods of forecastin& shou#d never be used with 1uantitative forecastin& methods.

Answer: "a#se

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: 2ud&ment, 1uantitative, method

1+. The De#phi method is a process of &ainin& consensus from a &roup of e5perts by debate and votin&

throu&hout severa# rounds of &roup discussion #ed by a moderator.

Answer: "a#se

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: 2ud&ment, De#phi, method

1/. !e&ression e1uations with a coefficient of determination c#ose to 4ero are e5treme#y accurate because

they have #itt#e forecast error.

Answer: "a#se

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, coefficient, determination

23. The c#oser the va#ue of the samp#e corre#ation coefficient is to ,1.33, the worse the predictive abi#ity

of the independent variab#e for the dependent variab#e.

Answer: "a#se

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, coefficient, corre#ation, samp#e

113

Chapter 13 Forecasting

21. The #ar&er the s#ope of the re&ression #ine, the more accurate the re&ression forecast.

Answer: "a#se

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: Easy

Keywords: re&ression, coefficient, s#ope

22. % #inear re&ression mode# resu#ts in the e1uation 9:1$,23;. <f the coefficient of determination is a

perfect 1.3, the corre#ation coefficient must be ,1.

Answer: True

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, coefficient, s#ope, corre#ation, determination

23. The standard error of the estimate measures how c#ose#y the data on the independent variab#e c#uster

around the re&ression #ine.

Answer: "a#se

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: standard, error, re&ression

2. Time,series forecasts re1uire information about on#y the dependent variab#e.

Answer: True

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: time,series, method, time, dependent

2$. % na=ve forecast is a time,series method whereby the forecast for the ne5t period e1ua#s the demand

for the current period.

Answer: True

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: na=ve, method

2). The advanta&e of the simp#e movin&,avera&e forecast is that it a##ows you to emphasi4e recent

demand over ear#ier demand.

Answer: "a#se

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: simp#e, movin&, avera&e, forecast

2*. % simp#e movin& avera&e of one period wi## yie#d identica# resu#ts to a na=ve forecast.

Answer: True

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: simp#e, movin&, avera&e, na=ve

114

Chapter 13 Forecasting

2+. The e5ponentia# smoothin& method is a sophisticated, wei&hted, movin&,avera&e method.

Answer: True

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&, wei&hted, movin&, avera&e

2/. %n e5ponentia# smoothin& mode# with an a#pha e1ua# to 1.33 is the same as a na=ve forecastin&

mode#.

Answer: True

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&, a#pha, naive

33. >hen a trend is present, e5ponentia# smoothin& a#ways wi## be be#ow or above the actua# demand.

Answer: True

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&, trend

31. %n additive seasona# method is a forecastin& approach whereby seasona# forecasts are &enerated by

addin& the resu#ts of two or more forecastin& techni1ues toðer to obtain a fina# forecast.

Answer: "a#se

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: additive, seasona#, forecastin&

32. "orecasts a#ways contain errors.

Answer: True

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: forecast, error

33. "orecast error is simp#y the difference between the forecast and actua# demand.

Answer: True

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: forecast, error, forecast, demand

3. % bias error resu#ts from unpredictab#e factors that cause the forecast to deviate from actua# demand.

Answer: "a#se

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: bias, error

3$. 'ome ana#ysts prefer to use a ho#dout set as the fina# test of a forecastin& procedure.

Answer: True

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: ho#dout, set, accuracy

115

Chapter 13 Forecasting

3). 6ombination forecastin& is a method of forecastin& that se#ects the best from a &roup of forecasts

&enerated by simp#e techni1ues.

Answer: "a#se

Reference: .sin& (u#tip#e Techni1ues

Difficulty: (oderate

Keywords: combination, forecast

3*. "ocus forecastin& se#ects the best forecast from a &roup of forecasts &enerated by individua#

techni1ues.

Answer: True

Reference: .sin& (u#tip#e Techni1ues

Difficulty: (oderate

Keywords: focus, forecastin&

MULTIPLE C!ICE

3+. >hich one of the fo##owin& basic patterns of demand is difficu#t to predict because it is affected by

nationa# or internationa# events or because of a #ack of demand history ref#ectin& the sta&es of demand

from product deve#opment to dec#ine?

a. @ori4onta#

b. 'easona#

c. !andom

d. 6yc#ica#

Answer: d

Reference: Demand Patterns

Difficulty: (oderate

Keywords: cyc#ica#, cyc#e, demand, pattern

3/. The e#ectricity bi## at Padco was driven so#e#y by the #i&hts throu&hout the officeA everythin& e#se was

driven by a#ternative ener&y sources. The office was open rou&h#y + hours a day, five days a week and

the c#eanin& crew spent about the same amount of time in the offices each week ni&ht. The ki#owatt

hour usa&e for the office was best described as a7

a. hori4onta# demand pattern.

b. random demand pattern.

c. seasona# demand pattern.

d. cyc#ica# demand pattern.

Answer: a

Reference: Demand Patterns

Difficulty: Easy

Keywords: hori4onta#, demand, pattern

11"

Chapter 13 Forecasting

3. % re&ression e1uation with a coefficient of determination near one wou#d be most #ike#y to occur

when the data demonstrated a7

a. seasona# demand pattern.

b. trend demand pattern.

c. cyc#ica# demand pattern.

d. random demand pattern.

Answer: b

Reference: Demand Patterns

Difficulty: Easy

Keywords: trend, demand, pattern, coefficient, determination, re&ression

1. Professor >i##is noted that the popu#arity of his office hours mysterious#y rose in the midd#e and the

end of each semester, fa##in& off to virtua##y no visitors throu&hout the rest of the year. The demand

pattern at work is7

a. cyc#ica#.

b. random.

c. seasona#.

d. trend.

Answer: c

Reference: Demand Patterns

Difficulty: Easy

Keywords: seasona#, demand, pattern

2. There are historica##y three 32,month periods of &enera##y risin& prices in the stock market for every

one /,month period of fa##in& prices. This observation #eads you to conc#ude that the stock market

e5hibits a7

a. random pattern.

b. trend pattern

c. seasona# pattern.

d. cyc#ica# pattern.

Answer: d

Reference: Demand Patterns

Difficulty: Easy

Keywords: cyc#ica#, demand, pattern

3. Po##y Pro&nosticator was the &reatest 1uantitative forecaster in recorded history. % ski##fu# user of a##

techni1ues in your chapter on forecastin&, she knew better than to try and deve#op a forecast for data

that e5hibited a7

a. random pattern.

b. hori4onta# pattern.

c. seasona# pattern.

d. cyc#ica# pattern.

Answer: a

Reference: Demand Patterns

Difficulty: Easy

Keywords: random, demand, pattern

11#

Chapter 13 Forecasting

. >hich one of the fo##owin& statements about the patterns of a demand series is "%8'E?

a. The five basic patterns of most business demand series are the hori4onta#, trend, seasona#, cyc#ica#,

and random patterns.

b. Estimatin& cyc#ica# movement is difficu#t. "orecasters do not know the duration of the cyc#e

because they cannot predict the events that cause it.

c. The trend, over an e5tended period of time, a#ways increases the avera&e #eve# of the series.

d. Every demand series has at #east two components7 hori4onta# and random.

Answer: c

Reference: Demand Patterns

Difficulty: (oderate

Keywords: demand, pattern, trend

$. >hich one of the fo##owin& factors affectin& demand for &oods and services is an e5terna# factor?

a. Product desi&n

b. 6onsumer tastes

c. Price and advertisin& promotions

d. Packa&in& desi&n

Answer: b

Reference: Demand Patterns

Difficulty: (oderate

Keywords: factor, consumer, demand, e5terna#

). >hich one of the fo##owin& factors affectin& demand for &oods and services is an interna# factor?

a. Back#o& po#icy

b. Cenera# state of the economy

c. 6ompetitor actions

d. 6onsumer tastes

Answer: a

Reference: Demand Patterns

Difficulty: (oderate

Keywords: interna#, factor

*. One aspect of demand that makes every forecast inaccurate is7

a. trend variation.

b. random variation.

c. cyc#ica# variation.

d. seasona# variation.

Answer: b

Reference: Demand Patterns

Difficulty: (oderate

Keywords: random, variation

11$

Chapter 13 Forecasting

+. >hich one of the fo##owin& statements about forecastin& is "%8'E?

a. To achieve the ob2ective of deve#opin& a usefu# forecast from the information at hand, the

forecaster must se#ect the appropriate techni1ue. This choice sometimes invo#ves a trade,off

between forecast accuracy and cost.

b. Three &enera# types of forecastin& techni1ues are used for demand forecastin&7 time,series ana#ysis,

causa# methods, and 2ud&ment methods.

c. Time series e5press the re#ationship between the factor to be forecast and re#ated factors such as

promotiona# campai&ns, economic conditions, and competitor actions.

d. % time series is a #ist of repeated observations of a phenomenon, such as demand, arran&ed in the

order in which they actua##y occurred.

Answer: c

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: time, series, factor, causa#

/. >hen forecastin& tota# demand for a## their services or products, few companies err by more than7

a. one percent.

b. ten percent.

c. five percent.

d. twenty percent.

Answer: c

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: a&&re&ation, accuracy, forecast

$3. >hich one of the fo##owin& statements about forecastin& is T!.E?

a. The five basic patterns of demand are the hori4onta#, trend, seasona#, cyc#ica#, and the sub2ective

2ud&ment of forecasters.

b. 0ud&ment methods are desi&ned particu#ar#y for situations in which historica# data are #ackin&.

c. 6asua# methods are used when historica# data are avai#ab#e and the re#ationship between the factor

to be forecast and other e5terna# and interna# factors cannot be identified.

d. "ocused forecastin& is a techni1ue that focuses on one particu#ar component of demand and

deve#ops a forecast from it.

Answer: b

Reference: (u#tip#e sections

Difficulty: (oderate

Keywords: 2ud&ment, data, forecast

$1. >hich one of the fo##owin& statements about forecastin& is T!.E?

a. Determinin& turnin& points, which are periods when the &rowth rate of demand wi## chan&e, can

best be accomp#ished with time,series methods.

b. <n the short,term Dhere, one to three months in the futureE, mana&ers are typica##y interested in

forecasts of tota# sa#es and &roups or fami#ies of products.

c. 6ausa# mode#s are the methods most often used for short,term forecastin&.

d. "or time hori4ons e5ceedin& two years, forecasts are usua##y deve#oped for tota# sa#es demand in

do##ars or some other common unit of measurement such as barre#s, pounds, or ki#owatts.

Answer: d

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: forecast, time, series, hori4on, future, units

11%

Chapter 13 Forecasting

$2. % short term forecast Dup to 3 monthsE wou#d most probab#y use7

a. tota# sa#es do##ars to describe the output.

b. a&&re&ated &roups of services or products as the output.

c. individua# services or products as the outputs.

d. sa#es do##ars for each product or &roup as the output.

Answer: c

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: forecast, hori4on

$3. 8on& term is the correct time hori4on for which of the fo##owin& decisions?

a. (aster production p#annin&.

b. 'taff p#annin&

c. <nventory mana&ement

d. "aci#ity #ocation

Answer: d

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: forecast, hori4on, #on&, term, faci#ity, #ocation

$. 'hort term is the correct time hori4on for which of the fo##owin& decisions?

a. (aster production p#annin&.

b. 6apacity p#annin&

c. Process mana&ement

d. "aci#ity #ocation

Answer: a

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: forecast, hori4on, short, term, master, production

$$. (edium term D3 months to 2 yearsE is the correct time hori4on for which of the fo##owin& decisions?

a. >orkforce schedu#in&.

b. 6apacity p#annin&

c. 'taff p#annin&

d. "aci#ity #ocation

Answer: c

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: forecast, hori4on, medium, staff

$). % forecastin& system that brin&s the manufacturer and its customers toðer to provide input for

forecastin& is aDnE7

a. nested system.

b. harmonica##y ba#anced supp#y chain.

c. iterative De#phi method system for the va#ue chain.

d. co##aborative p#annin&, forecastin&, and rep#enishment system.

Answer: d

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: forecast, hori4on

12&

Chapter 13 Forecasting

$*. .sin& sa#esforce estimates for forecastin& has the advanta&e that7

a. no biases e5ist in the forecasts.

b. statistica# estimates of seasona# factors are more precise than any other approach.

c. forecasts of individua# sa#es force members can be easi#y combined to &et re&iona# or nationa# sa#es

tota#s.

d. confusion between customer FwantsG Dwish #istE and customer FneedsG Dnecessary purchasesE is

e#iminated.

Answer: c

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: forecast, a&&re&ate

$+. % sa#esforce estimate may be used to forecast future demand when data are unavai#ab#e. This

techni1ue suffers when7

a. a sa#esman is unab#e to distin&uish between customer wants and needs.

b. the sa#es force estimates are for intermediate time hori4ons.

c. the sa#es force estimates are a&&re&ated to make an overa## estimate for demand.

d. the sa#es territories are broken down into re&ion or by product.

Answer: a

Reference: 0ud&ment (ethods

Difficulty: Easy

Keywords: sa#esforce, estimate

$/. >hich one of the fo##owin& is an e5amp#e of a time,series forecastin& techni1ue?

a. 'urvey ana#ysis

b. De#phi method

c. Trend,ad2usted e5ponentia# smoothin&

d. (arket research

Answer: c

Reference: (u#tip#e sections

Difficulty: (oderate

Keywords: time, series, trend, e5ponentia#, smoothin&

)3. The 2ud&ment methods of forecastin& are to be used for purposes of7

a. makin& ad2ustments to 1uantitative forecasts due to unusua# circumstances.

b. forecastin& seasona# demands in #ieu of time,series approaches.

c. avoidin& the ca#cu#ations necessary for 1uantitative forecasts.

d. makin& forecasts more variab#e.

Answer: a

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: 2ud&ment, ad2ustments, 1uantitative

121

Chapter 13 Forecasting

)1. The De#phi method of forecastin& is usefu# when7

a. 2ud&ment and opinion are the on#y bases for makin& informed pro2ections.

b. a systematic approach to creatin& and testin& hypotheses is needed and the data are usua##y

&athered by sendin& a 1uestionnaire to consumers.

c. historica# data are avai#ab#e and the re#ationship between the factor to be forecast and other e5terna#

or interna# factors can be identified.

d. historica# data is avai#ab#e and the best basis for makin& pro2ections is to use past demand patterns.

Answer: a

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: De#phi, 2ud&ment, opinion

)2. The manufacturer deve#oped and tested a 1uestionnaire, desi&ned to assist them in &au&in& the #eve#

of acceptance for their new product, and identified a representative samp#e as part of their7

a. sa#esforce estimate.

b. market research.

c. e5ecutive opinion.

d. De#phi method.

Answer: b

Reference: 0ud&ment (ethods

Difficulty: Easy

Keywords: market research, 2ud&ment

)3. <t wou#d be most appropriate to combine a 2ud&ment approach to forecastin& with a 1uantitative

approach by7

a. havin& a &roup of e5perts e5amine each historica# data point to determine whether it shou#d be

inc#uded in the mode#.

b. combinin& opinions about the 1uantitative mode#s to form one ubermode#.

c. ad2ustin& a forecast up or down to compensate for specific events not inc#uded in the 1uantitative

techni1ue.

d. deve#opin& a trend mode# to predict the outcomes of 2ud&menta# techni1ues in order to avoid the

cost of emp#oyin& the e5perts

Answer: c

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: market research, 2ud&ment

). % #inear re&ression mode# is deve#oped that has a s#ope of H2.$ and an intercept of 13. The samp#e

coefficient of determination is 3.$3. >hich of the fo##owin& statements is T!.E?

a. The samp#e corre#ation coefficient must be 3.2$.

b. The samp#e corre#ation coefficient must be ,3.*1.

c. The samp#e corre#ation coefficient must be ,3.2$.

d. The samp#e corre#ation coefficient must be 3.*1.

Answer: b

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: #inear, re&ression, samp#e corre#ation coefficient

122

Chapter 13 Forecasting

)$. The number of I2 penci#s the bookstore se##s appears to be hi&h#y corre#ated with the number of

student credit hours each semester. The bookstore mana&er wants to create a #inear re&ression mode#

to assist her in p#acin& an appropriate order. <n this scenario7

a. the dependent variab#e is student credit hours.

b. there are two independent variab#es.

c. there are two dependent variab#es.

d. the independent variab#e is student credit hours.

Answer: d

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: Easy

Keywords: #inear, re&ression, samp#e corre#ation coefficient

)). >hich of the fo##owin& statements re&ardin& a samp#e corre#ation coefficient is T!.E?

a. The samp#e corre#ation coefficient is a#ways #ess than the coefficient of determination.

b. The samp#e corre#ation coefficient is a#ways #ess than the s#ope.

c. The samp#e corre#ation coefficient is a#ways #ess than or e1ua# to 1.

d. The samp#e corre#ation coefficient is a#ways between 3 and 1.

Answer: c

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: Easy

Keywords: #inear, re&ression, samp#e corre#ation coefficient

Tab#e 13.1

The %&ricu#tura# E5tension %&entJs Office has tracked ferti#i4er app#ication and crop

yie#ds for a variety of chickpea and has recorded the fo##owin& data as shown in the

fo##owin& tab#e. Their staff statistician deve#oped the re&ression mode# and computed

the performance statistics disp#ayed be#ow the data.

FertilizerBushels10481571202122529030195SUMMARY OUTPUTRegression

Statistics CoefficientsMultiple R0.671774612Intercept26.7645833R

Su!re0.45128113"ertili#er8.85273298A$%u&te$ R Su!re0.26837484St!n$!r$

'rr(r89.11239227O)&er*!ti(n&5

123

Chapter 13 Forecasting

)*. .se the information provided in Tab#e 13.1. >hat percent in the variation of the variab#e Bushels is

e5p#ained by the va#ue of the variab#e Fertilizer?

a. )*K

b. $K

c. 2)K

d. +.+K

Answer: b

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, coefficient, determination, variance

)+. .se the information provided in Tab#e 13.1. "or every unit of ferti#i4er app#ied, the crop yie#d

increases by7

a. 2).* bushe#s.

b. +.+$ bushe#s.

c. +/.11 bushe#s.

d. $ bushe#s.

Answer: b

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, intercept

)/. .se the information provided in Tab#e 13.1. The va#ue of Bushels when Fertilizer is )3 is7

a. 1)1.

b. 22).

c. +*3.

d. $$+.

Answer: d

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, forecast

*3. .se the information provided in Tab#e 13.1. The va#ue of Fertilizer re1uired to &enerate 133 bushe#s

yie#d must be7

a. +.2+.

b. 3.3.

c. $.12.

d. 1.3*.

Answer: a

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, forecast

124

Chapter 13 Forecasting

*1. .se the information provided in Tab#e 13.1. >e mi&ht e5pect that unferti#i4ed crops wou#d yie#d a

tota# of7

a. +/ bushe#s.

b. $2 bushe#s.

c. 2) bushe#s.

d. / bushe#s.

Answer: c

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, intercept

*2. .se the information in Tab#e 13.1. <f the corre#ation coefficient were ne&ative, what wou#d a#so be

true?

a. The coefficient of determination wou#d a#so be ne&ative.

b. %n increase in ferti#i4er wou#d resu#t in a decrease in crop yie#d.

c. %pp#yin& no ferti#i4er wou#d mean a ne&ative crop yie#d.

d. The standard error wou#d a#so be ne&ative.

Answer: b

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, s#ope, coefficient, corre#ation

*3. >hich one of the fo##owin& statements about forecastin& is "%8'E?

a. 9ou shou#d use the simp#e movin&,avera&e method to estimate the mean demand of a time series

that has a pronounced trend and seasona# inf#uences.

b. The wei&hted movin&,avera&e method a##ows forecasters to emphasi4e recent demand over ear#ier

demand. The forecast wi## be more responsive to chan&e in the under#yin& avera&e of the demand

series.

c. The most fre1uent#y used time,series forecastin& method is e5ponentia# smoothin& because of its

simp#icity and the sma## amount of data needed to support it.

d. <n e5ponentia# smoothin&, hi&her va#ues of a#pha p#ace &reater wei&ht on recent demands in

computin& the avera&e.

Answer: a

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: forecastin&, movin&, avera&e, trend, seasona#

*. >hich of the fo##owin& statements re&ardin& time,series methods is "%8'E?

a. % na=ve forecast is identica# to a simp#e movin& avera&e of one period.

b. E5ponentia# smoothin& with an a#pha e1ua# to 1.33 is identica# to a na=ve forecast.

c. % wei&hted movin& avera&e with wei&hts of 3.$ and 3.$ is identica# to a simp#e movin& avera&e of

two periods.

d. % simp#e movin& avera&e of three periods is identica# to e5ponentia# smoothin& with an a#pha e1ua#

to 3.33.

Answer: d

Reference: Time,'eries (ethods

Difficulty: @ard

Keywords: time, series, e5ponentia#, avera&e, na=ve, smoothin&

125

Chapter 13 Forecasting

*$. >hen the under#yin& mean of a time series is very stab#e and there are no trend, cyc#ica#, or seasona#

inf#uences7

a. a simp#e movin&,avera&e forecast with n : 23 shou#d outperform a simp#e movin&,avera&e forecast

with n : 3.

b. a simp#e movin&,avera&e forecast with n : 3 shou#d outperform a simp#e movin&,avera&e forecast

with n : 23.

c. a simp#e movin&,avera&e forecast with n : 23 shou#d perform about the same as a simp#e movin&,

avera&e forecast with n : 3.

d. an e5ponentia# smoothin& forecast with a : 3.33 shou#d outperform a simp#e movin&,avera&e

forecast with L : 3.31.

Answer: a

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: time, series, movin&, avera&e, stab#e

*). >ith the trend,ad2usted e5ponentia# smoothin& method7

a. the forecast for the ne5t period is simp#y the avera&e computed this period.

b. an estimate of the trend is computed by takin& the difference between the demand this period and

the demand #ast period to avoid #en&thy avera&in& ca#cu#ations.

c. the on#y smoothin& is done on the trend estimates usin& e5ponentia# smoothin&.

d. the forecast can be ad2usted to account for chan&es in the trend.

Answer: d

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: trend, ad2usted, e5ponentia#

**. >ith the mu#tip#icative seasona# method of forecastin&7

a. the times series cannot e5hibit a trend.

b. seasona# factors are mu#tip#ied by an estimate of avera&e demand to arrive at a seasona# forecast.

c. the seasona# amp#itude is a constant, re&ard#ess of the ma&nitude of avera&e demand.

d. there can be on#y four seasons in the time,series data.

Answer: b

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: mu#tip#icative, seasona#

*+. >hich one of the fo##owin& statements about forecastin& is "%8'E?

a. The method for incorporatin& a trend into an e5ponentia##y smoothed forecast re1uires the

estimation of three smoothin& constants7 one for the mean, one for the trend, and one for the

error.

b. The cumu#ative sum of forecast errors D6"EE is usefu# in measurin& the bias in a forecast.

c. The standard deviation and the mean abso#ute deviation measure the dispersion of forecast errors.

d. % trackin& si&na# is a measure that indicates whether a method of forecastin& has any bui#t,in

biases over a period of time.

Answer: a

Reference: (u#tip#e sections

Difficulty: (oderate

Keywords: trend, e5ponentia#, smoothin&

12"

Chapter 13 Forecasting

*/. >hich one of the fo##owin& is most usefu# for measurin& the bias in a forecast?

a. 6umu#ative sum of forecast errors

b. 'tandard deviation of forecast errors

c. (ean abso#ute deviation of forecast errors

d. Percenta&e forecast error in period t

Answer: a

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: bias, cumu#ative, sum, error

+3. >hich one of the fo##owin& time,series forecastin& methods wi## &enerate the most accurate forecasts

when demands have a consistent trend pattern?

a. 'imp#e movin&,avera&e method

b. >ei&hted movin&,avera&e method

c. E5ponentia# smoothin& method

d. Trend,ad2usted e5ponentia# smoothin& method

Answer: d

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: trend, ad2usted, e5ponentia#, smoothin&

+1. % trackin& si&na# &reater than 4ero and a mean abso#ute deviation &reater than 4ero imp#y that the

forecast has7

a. no bias and no variabi#ity of forecast error.

b. a non4ero amount of bias and a non4ero amount of forecast error variabi#ity.

c. no bias and a non4ero amount of forecast error variabi#ity.

d. a non4ero amount of bias and no variabi#ity of forecast error.

Answer: b

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: @ard

Keywords: trackin&, si&na#, error

+2. %ssume that a time,series forecast is &enerated for future demand and subse1uent#y it is observed that

the forecast method did not accurate#y predict the actua# demand. 'pecifica##y, the forecast errors

were found to be7

(ean abso#ute percent error : 13K

6umu#ative sum of forecast errors : 3K

>hich one of the statements concernin& this forecast is T!.E?

a. The forecast has no bias but has a positive standard deviation of errors.

b. The forecast has a positive bias and a standard deviation of errors e1ua# to 4ero.

c. The forecast has no bias and has a standard deviation of errors e1ua# to 4ero.

d. The forecast has a positive bias and a positive standard deviation of errors.

Answer: a

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: bias, standard, deviation

12#

Chapter 13 Forecasting

+3. >hich one of the fo##owin& statements is T!.E?

a. The idea# of 4ero bias and 4ero (%D can be accomp#ished by systematica##y searchin& for the best

va#ues of the smoothin& constants.

b. Bias is a#ways #ess than (%D.

c. "or pro2ections of more stab#e demand patterns without trends, seasona# inf#uences, or cyc#ica#

inf#uences, use #ar&er va#ues of n in the simp#e movin&,avera&e approach.

d. Cettin& a sin&#e forecast of $33 units for the month of 0u#y is better than &ettin& a forecast showin&

a /$ percent chance that demand for 0u#y wi## be between $3 and $$3 units.

Answer: c

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: simp#e, movin&, avera&e, trend

+. >hich one of the fo##owin& is an e5amp#e of causa# forecastin& techni1ue?

a. >ei&hted movin& avera&e

b. 8inear re&ression

c. E5ponentia# smoothin&

d. De#phi method

Answer: b

Reference: (u#tip#e sections

Difficulty: (oderate

Keywords: causa#, re&ression, #inear

+$. .se the information from Tab#e 13.2. .sin& a three,week movin& avera&e, what is the forecast for

week *?

a. $$

b. $)

c. $*

d. $+

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: movin&, avera&e

12$

Tab#e 13.2

The mana&er of a pi44a shop must forecast week#y demand for specia# pi44as so that he can

order pi44a she##s week#y. !ecent demand has been7

Chapter 13 Forecasting

+). .se the information from Tab#e 13.2. <f a na=ve forecast were constructed for week *, the va#ue

obtained wou#d be7

a. $3 pi44as.

b. $$ pi44as.

c. $) pi44as.

d. )3 pi44as.

Answer: d

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: na=ve, forecast, time, series

+*. .se the information from Tab#e 13.2. <f a four,week wei&hted movin& avera&e were used, what wou#d

be the forecast for week *? DThe wei&hts are 3.)3, 3.33, 3.3*, and 3.33 with 3.)3 app#ied to the most

recent period and 3.33 app#ied to the o#dest period.E

a. $+ pi44as

b. )3 pi44as

c. )2 pi44as

d. ) pi44as

Answer: a

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: wei&hted, movin&, avera&e, time

++. Demand for a new five,inch co#or TM durin& the #ast si5 periods has been as fo##ows7

>hat is the forecast for period * if the company uses the simp#e movin&,avera&e method with n : ?

a. "ewer than or e1ua# to 11$

b. Creater than 11$ but fewer than or e1ua# to 123

c. Creater than 123 but fewer than or e1ua# to 12$

d. Creater than 12$

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: simp#e, movin&, avera&e

12%

Chapter 13 Forecasting

+/. Demands for a new#y deve#oped sa#ad bar at the Creat Professiona# restaurant for the first si5 months

of this year are shown in the fo##owin& tab#e. >hat is the forecast for 0u#y if the 3,month wei&hted

movin&,avera&e method is used? D.se wei&hts of 3.$ for the most recent demand, 3.3, and 3.2 for the

o#dest demand.E

a. "ewer than or e1ua# to 32 units

b. Creater than 32 units but fewer than or e1ua# to 2 units

c. Creater than 2 units but fewer than or e1ua# to $2 units

d. Creater than $2

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: wei&hted, movin&, avera&e

/3. <t is now near the end of (ay and you must prepare a forecast for 0une for a certain product. The

forecast for (ay was /33 units. The actua# demand for (ay was 1333 units. 9ou are usin& the

e5ponentia# smoothin& method with : 3.23. The forecast for 0une is7

a. fewer than /2$ units.

b. &reater than or e1ua# to /2$ units but fewer than /$3 units.

c. &reater than or e1ua# to /$3 units but fewer than 1333 units.

d. &reater than or e1ua# to 1333 units.

Answer: a

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&

13&

Chapter 13 Forecasting

/1. The owner of the 6rossed 6onnections e#ectronic app#iance repair shop is en2oyin& increasin&

demand for her services. Tota# week#y demand, measured in standard #abor hours, has been

increasin&. The owner uses trend,ad2usted e5ponentia# smoothin& to make forecasts for the fo##owin&

week so that she can p#an work schedu#es and staffin& #eve#s. 'he has the fo##owin& data to prepare

her forecast7

A

tH1

: 133 hours : 3.33

T

tH1

: 13 hours : 3.13

D

t

: 123 hours

%ssumin& she is now at the end of week t, what is the forecast for week t N 1?

a. "ewer than or e1ua# to 11 hours

b. Creater than 11 hours but fewer than or e1ua# to 11+ hours

c. Creater than 11+ hours but fewer than or e1ua# to 122 hours

d. Creater than 122 hours

Answer: d

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: trend, ad2usted, e5ponentia#, smoothin&

/2. The %cme 6omputer 6ompany has recorded sa#es of one of its products for a si5,week period7

.sin& the three,week movin&,avera&e method, forecast sa#es for week *.

a. 23

b. 21

c. 22

d. 23

Answer: d

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: movin&, avera&e

131

Chapter 13 Forecasting

/3. .se the information in Tab#e 13.3. 6ompute a three,week movin&,avera&e forecast for the arriva# of

medica# c#inic patients in week $.

a. "ewer than or e1ua# to 3+2

b. Creater than 3+2 but fewer than or e1ua# to 3+/

c. Creater than 3+/ but fewer than or e1ua# to 3/)

d. Creater than 3/)

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: movin&, avera&e

/. .se the information in Tab#e 13.3. <f the actua# number of patients is 1$ in week $, what is the

forecast for week ), usin& a three,week movin&,avera&e forecast?

a. "ewer than or e1ua# to 3/3

b. Creater than 3/3 but fewer than or e1ua# to 3/+

c. Creater than 3/+ but fewer than or e1ua# to 3)

d. Creater than 3)

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: movin&, avera&e

/$. .se the information in Tab#e 13.3. 6a#cu#ate the e5ponentia# smoothin& forecast for week $ usin& :

3.13 and F

: 13.

a. "ewer than or e1ua# to 33

b. Creater than 33 but fewer than or e1ua# to 3+

c. Creater than 3+ but fewer than or e1ua# to 1)

d. Creater than 1)

Answer: b

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&

132

Tab#e 13.3

Chapter 13 Forecasting

/). .se the information in Tab#e 13.. .se the three,month movin&,avera&e method to forecast sa#es for

0une.

a. "ewer than or e1ua# to 23 units

b. Creater than 23 but fewer than or e1ua# to 22 units

c. Creater than 22 but fewer than or e1ua# to 2 units

d. Creater than 2 units

Answer: d

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: movin&, avera&e

/*. .se the information in Tab#e 13.. 'uppose actua# sa#es in 0une turn out to be 3 units. .se the three,

month movin&,avera&e method to forecast the sa#es in 0u#y.

a. "ewer than or e1ua# to 2*

b. Creater than 2* but fewer than or e1ua# to 2/ units

c. Creater than 2/ but fewer than or e1ua# to 31 units

d. Creater than 31 units

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: movin&, avera&e

/+. .se the information in Tab#e 13.. >hat is the forecast for 0u#y with the two,month movin&,avera&e

method and 0une sa#es of 3 units?

a. "ewer than or e1ua# to 2$ units

b. Creater than 2$ but fewer than or e1ua# to 33 units

c. Creater than 33 but fewer than or e1ua# to 3$ units

d. Creater than 3$ units

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: movin&, avera&e

133

Tab#e 13.

Chapter 13 Forecasting

//. .se the information in Tab#e 13.. The forecastin& e1uation for a three,month wei&hted movin&

avera&e is7

F

t

: W

1

D

t

N W

2

D

tH1

N W

3

D

tH2

<f the sa#es for 0une were 3 units and the wei&hts are W

1

: 1O2, W

2

: 1O3, and W

3

: 1O), what is

the forecast for 0u#y?

a. "ewer than or e1ua# to 33 units

b. Creater than 33 but fewer than or e1ua# to 33 units

c. Creater than 33 but fewer than or e1ua# to 3) units

d. Creater than 3) units

Answer: b

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: wei&hted, movin&, avera&e

133. .se the information in Tab#e 13.$. .sin& the simp#e movin&,avera&e techni1ue for the most

recent three months, what wi## be the forecasted demand for Povember?

a. "ewer than or e1ua# to 2)3 units

b. Creater than 2)3, but fewer than or e1ua# to 2*$ units

c. Creater than 2*$, but fewer than or e1ua# to 2/3 units

d. (ore than 2/3 units

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: simp#e, movin&, avera&e

134

Tab#e 13.$

Chapter 13 Forecasting

131. .se the information in Tab#e 13.$. .sin& the ,month wei&hted movin&,avera&e techni1ue and

the fo##owin& wei&hts, what is the forecasted demand for Povember?

Ti+e Peri($ ,ei-.t

(ost recent month $3K

One month a&o 23K

Two months a&o 23K

Three months a&o 13K

a. "ewer than or e1ua# to 2$3 units

b. Creater than 2$3 but fewer than or e1ua# to 2)$ units

c. Creater than 2)$ but fewer than or e1ua# to 2+3 units

d. (ore than 2+3 units

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: wei&hted, movin&, avera&e

132. .se the information in Tab#e 13.$. .sin& the e5ponentia# smoothin& method, with a#pha e1ua# to

3.2, what is the forecasted demand for Povember? .se an initia# va#ue for the forecast e1ua# to 2**

units.

a. "ewer than or e1ua# to 2)3 units

b. Creater than 2)3 but fewer than or e1ua# to 2*$ units

c. Creater than 2*$ but fewer than or e1ua# to 2+$ units

d. (ore than 2+$ units

Answer: b

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&

135

Tab#e 13.)

Chapter 13 Forecasting

133. .se the information in Tab#e 13.). .se an e5ponentia# smoothin& mode# with a smoothin&

parameter of 3.33 and an %pri# forecast of $2$ to determine what the forecast sa#es wou#d have been

for 0une.

a. "ewer than or e1ua# to $3$

b. Creater than $3$ but fewer than or e1ua# to $$

c. Creater than $$ but fewer than or e1ua# to $$$

d. Creater than $$$

Answer: c

Reference: Time,'eries (ethods

Difficulty: @ard

Keywords: e5ponentia#, smoothin&

13. .se the information in Tab#e 13.). .se the e5ponentia# smoothin& method with : 3.$ and a

"ebruary forecast of $33 to forecast the sa#es for (ay.

a. "ewer than or e1ua# to $33

b. Creater than $33 but fewer than or e1ua# to $3

c. Creater than $3 but fewer than or e1ua# to $$3

d. Creater than $$3

Answer: b

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&

13$. .se the information in Tab#e 13.*. The forecast for month 2 is7

a. fewer than or e1ua# to 123 units.

b. &reater than 123 but fewer than or e1ua# to 13 units.

c. &reater than 13 but fewer than or e1ua# to 1)3 units.

d. &reater than 1)3 units.

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&

13"

Tab#e 13.*

TO(BO> is a sma## manufacturer of penci#s and has had the fo##owin& sa#es record for the

most recent five months7

.se an e5ponentia# smoothin& mode# to forecast sa#es in months 2, 3, , and $. 8et the

smoothin& parameter e1ua# 3.)A se#ect "

1

: 1$3 to &et the forecast started.

Chapter 13 Forecasting

13). .se the information in Tab#e 13.*. The forecast for month 3 is7

a. fewer than or e1ua# to 13 units.

b. &reater than 13 but fewer than or e1ua# to 1)3 units.

c. &reater than 1)3 but fewer than or e1ua# to 1+3 units.

d. &reater than 1+3 units.

Answer: b

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&

13*. .se the information in Tab#e 13.*. The forecast for month is7

a. fewer than or e1ua# to 13 units.

b. &reater than 13 but fewer than or e1ua# to 1$3.

c. &reater than 1$3 but fewer than or e1ua# to 1)3 units.

d. &reater than 1)3 units.

Answer: c

Reference: Time,'eries (ethod

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&

13+. .se the information in Tab#e 13.*. The forecast for month $ is7

a. fewer than or e1ua# to 1$3 units.

b. &reater than 1$3 but fewer than or e1ua# to 1)3 units.

c. &reater than 1)3 but fewer than or e1ua# to 1*3 units.

d. &reater than 1*3 units.

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: e5ponentia#, smoothin&

13/. .se the information in Tab#e 13.*. The cumu#ative sum of errors 6"E from months 2 throu&h $

is7

a. fewer than or e1ua# to +3.

b. &reater than +3 but fewer than or e1ua# to +$.

c. &reater than +* but fewer than or e1ua# to /3.

d. &reater than /3.

Answer: b

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: 6"E, cumu#ative, sum, error

113. .se the information in Tab#e 13.*. >hat is the (%D for months 2 throu&h $?

a. 8ess than or e1ua# to 23

b. Creater than 23 but #ess than or e1ua# to 2$

c. Creater than 2$ but #ess than or e1ua# to 33

d. Creater than 33

Answer: b

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: (%D, mean, abso#ute, deviation

13#

Chapter 13 Forecasting

111. The 6#assica# 6onsu#tant 6ompany provides forecastin& research for c#ients such as a &roup of

five doctors associated with a new hospita# hea#th,maintenance pro&ram. The company has been

asked to forecast the number of patients re1uestin& b#ood ana#ysis per week. The past week#y avera&e

is 3+ and, for the trend, is 2 per week. This weekJs demand was 2 b#ood tests. @ow many patients

wi## come ne5t week? D'uppose : 3.13 and : 3.33.E

a. "ewer than or e1ua# to 3/

b. Creater than 3/ but fewer than or e1ua# to 1

c. Creater than 1 but fewer than or e1ua# to 3

d. Creater than 3

Answer: c

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: trend, e5ponentia#, smoothin&

112. .se the information in Tab#e 13.+. "orecast the month#y sa#es of the machine for month /, usin&

the three,month movin&,avera&e method.

a. Q3,*2+

b. Q,3+$

c. Q3,++3

d. Q3,2**

Answer: c

Reference: Time,'eries (ethod

Difficulty: (oderate

Keywords: time, series, movin&, avera&e

113. .se the information in Tab#e 13.+. .se the 3,month wei&hted movin&,avera&e method to

ca#cu#ate the forecast for month /. The wei&hts are 3.)3, 3.33, and 3.13, where 3.)3 refers to the most

recent demand.

a. Q3,/1)

b. Q3,++3

c. Q3,3/)

d. Q3,22/

Answer: a

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: wei&hted, movin&, avera&e

13$

Tab#e 13.+

% sa#es mana&er wants to forecast month#y sa#es of the machines the company makes usin& the

fo##owin& month#y sa#es data.

Month Balance

1 /30803

2 /20558

3 /30469

4 /30442

5 /20682

6 /30469

7 /40442

8 /30728

Chapter 13 Forecasting

11. .se the information in Tab#e 13.+. <f the forecast for period * is Q,333, what is the forecast for

period / usin& e5ponentia# smoothin& with an a#pha e1ua# to 3.33?

a. Q,333

b. Q,32

c. Q,1$+

d. Q3,/$*

Answer: c

Reference: Time,'eries (ethods

Difficulty: @ard

Keywords: e5ponentia#, smoothin&

11$. .se the information in Tab#e 13.+. 6a#cu#ate the forecast for period / usin& a na=ve forecast.

a. Q3,*2+

b. Q3,+33

c. Q,2

d. Q,3+$

Answer: a

Reference: Time,'eries (ethods

Difficulty: Easy

Keywords: na=ve, forecast, time, series

Tab#e 13./

The mana&ement of an insurance company monitors the number of mistakes made by

te#ephone service representatives for a company they have subcontracted with. The number

of mistakes for the past severa# months appears in this tab#e a#on& with forecasts for errors

made with three different forecastin& techni1ues. The co#umn #abe#ed E5ponentia# was

created usin& e5ponentia# smoothin& with an a#pha of 3.33. The co#umn #abe#ed (% is

forecast usin& a movin& avera&e of three periods. The co#umn #abe#ed >(% uses a 3,month

wei&hted movin& avera&e with wei&hts of 3.)$, 3.2$, and 3.13 for the most,to,#east recent

months.

MonthMistakesExponentialMAWMA155 261 371 47771626758873707461007779847

10984889581229299105912610111011710126108119123

13%

Chapter 13 Forecasting

11). .sin& Tab#e 13./, what is the 6"E for months ),13 for the e5ponentia# smoothin& techni1ue?

a. 8ess than or e1ua# to 123

b. Creater than 123 but #ess than or e1ua# to 123

c. Creater than 123 but #ess than or e1ua# to 12)

d. Creater than 12)

Answer: b

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: 6"E, forecast, error

11*. .sin& Tab#e 13./, what is the ('E for months ),13 for the e5ponentia# smoothin& techni1ue?

a. 8ess than $/1

b. Creater than or e1ua# to $/1 but #ess than $/$

c. Creater than or e1ua# to $/$ but #ess than $//

d. Creater than $//

Answer: d

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: ('E, forecast, error

11+. .sin& Tab#e 13./, what is the (%D for months ),13 for the e5ponentia# smoothin& techni1ue?

a. 8ess than 23

b. Creater than or e1ua# to 23 but #ess than 2$

c. Creater than or e1ua# to 2$ but #ess than 2*

d. Creater than or e1ua# to 2*

Answer: b

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: (%D, forecast, error, mean, abso#ute

11/. .sin& Tab#e 13./, what is the order of the forecastin& techni1ues from most accurate to #east

accurate based on their errors for months ),13?

a. E5ponentia# smoothin&, wei&hted movin& avera&e, movin& avera&e

b. E5ponentia# smoothin&, movin& avera&e, wei&hted movin& avera&e

c. (ovin& avera&e, e5ponentia# smoothin&, wei&hted movin& avera&e

d. >ei&hted movin& avera&e, movin& avera&e, e5ponentia# smoothin&

Answer: d

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: forecast, error

14&

Chapter 13 Forecasting

123. .sin& Tab#e 13./, what is the mean abso#ute percent error for months ),13 usin& the e5ponentia#

smoothin& forecasts?

a. 8ess than 22K

b. Creater than or e1ua# to 22K but #ess than 2K

c. Creater than or e1ua# to 2K but #ess than 2)K

d. Creater than 2)K

Answer: a

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: (%PE, mean, abso#ute, percent, error

121. .sin& Tab#e 13./, what is the trackin& si&na# for months ),13 usin& the e5ponentia# smoothin&

forecasts?

a. 3.$

b. H3.$

c. $.3

d. H$.3

Answer: c

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: trackin&, si&na#, error

122. 6onsider the fo##owin& data concernin& the performance of a forecastin& method.

a. The 6"E is &reater than 133, and the (%D is #ess than $3.

b. The 6"E is #ess than 133, and the (%D is #ess than $3.

c. The 6"E is #ess than 133, and the (%D is &reater than $3.

d. The 6"E is &reater than 133, and the (%D is &reater than $3.

Answer: b

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: 6"E, (%D, cumu#ative, forecast, error, abso#ute, deviation, mean

141

Chapter 13 Forecasting

123. >hich statement about forecast accuracy is T!.E?

a. % mana&er must be carefu# not to FoverfitG past data.

b. The u#timate test of forecastin& power is how we## a mode# fits past data.

c. The u#timate test of forecastin& power is how a mode# fits ho#dout samp#es.

d. The best techni1ue in e5p#ainin& past data is the best techni1ue to predict the future.

Answer: a

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: forecast, accuracy

12. % forecaster that uses a ho#dout,set approach as a fina# test for forecast accuracy typica##y7

a. uses the entire data set avai#ab#e to deve#op the forecast.

b. uses the o#der observations in the data set to deve#op the forecast and more recent to check

accuracy.

c. uses the newer observations in the data set to deve#op the forecast and o#der observations to check

accuracy.

d. uses every other observation to deve#op the forecast and the remainin& observations to check the

accuracy.

Answer: b

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: ho#dout, set, accuracy

12$. Barney took what he #iked to ca## Fthe shot&un approachG to forecastin&. Every period he tried a

number of different forecastin& approaches and at the end of the period he reviewed a## of the

forecasts to see which was the most accurate. The winner wou#d be used for ne5t periodJs forecast

Dbut he sti## made forecasts a## possib#e ways so he cou#d use the system a&ain for the fo##owin&

periodE. The more forma# name for this techni1ue is7

a. combination forecastin&.

b. post,hoc forecastin&.

c. focus forecastin&.

d. shot&un forecastin&. @e is usin& the correct termino#o&y.

Answer: c

Reference: .sin& (u#tip#e Techni1ues

Difficulty: (oderate

Keywords: focus, forecastin&

12). %ndy took what he #iked to ca## Fthe sheriff without a &unG approach to forecastin&. Every period he

tried a number of different forecastin& approaches and simp#y avera&ed the predictions for a## of the

techni1ues. This overa## avera&e was the officia# forecast for the period. The more forma# name for

this techni1ue is7

a. &rand avera&in&.

b. focus forecastin&.

c. simp#e avera&e.

d. combination forecastin&.

Answer: d

Reference: .sin& (u#tip#e Techni1ues

Difficulty: (oderate

Keywords: combination, forecastin&

142

Chapter 13 Forecasting

12*. The input database to a forecastin& process is typica##y se&mented into7

a. parent and chi#d data

b. hierarchica# and re#ative data.

c. independent and dependent data.

d. base and nonbase data..

Answer: d

Reference: Puttin& <t %## Toðer7 "orecastin& as a Process

Difficulty: (oderate

Keywords: database, base, nonbase, data

12+. The #oca# bui#din& supp#y store e5perienced what they considered to be irre&u#ar demands for #umber

after the devastatin& hurricane season. These unusua# data points were considered7

a. nonbase data.

b. out#iers.

c. residua#s.

d. erroneous.

Answer: a

Reference: Puttin& <t %## Toðer7 "orecastin& as a Process

Difficulty: (oderate

Keywords: database, base, nonbase, data

12/. >hich word best describes forecastin& ?

a. Ruantitative

b. Process

c. !esource

d. (ana&eria#

Answer: b

Reference: Puttin& <t %## Toðer7 "orecastin& as a Process

Difficulty: (oderate

Keywords: process, forecast

FILL I' TE (LA')

133. SSSSSSSSSSSS is the prediction of future events used for p#annin& purposes.

Answer: "orecastin&

Reference: <ntroduction

Difficulty: Easy

Keywords: forecast, predict

131. SSSSSSSSSSSS is the act of c#usterin& severa# simi#ar products or services so that companies can

obtain more accurate forecasts.

Answer: %&&re&ation

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: a&&re&ation, c#usterin&, forecast, accuracy

143

Chapter 13 Forecasting

132. SSSSSSSSSSSS methods of forecastin& trans#ate the opinions of mana&ement, e5perts, consumers, or

sa#esforce into 1uantitative estimates.

Answer: 0ud&ment

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: 2ud&ment, method, forecast

133. SSSSSSSSSSSS methods use historica# data on independent variab#es to predict demand.

Answer: 6ausa#

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: causa#, method, forecastin&

13. SSSSSSSSSSSS ana#ysis is a statistica# approach that re#ies heavi#y on historica# demand data to

pro2ect the future si4e of demand, and it reco&ni4es trends and seasona# patterns.

Answer: Time,series

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: time, series, time,series

13$. The SSSSSSSSSSSS is a process of &ainin& consensus from a &roup of e5perts whi#e maintainin&

their anonymity.

Answer: De#phi method

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: De#phi, 2ud&ment, method

13). SSSSSSSSSSSS is a systematic approach to determine consumer interest in a product or service by

creatin& and testin& hypotheses throu&h data,&atherin& surveys.

Answer: (arket research

Reference: 0ud&ment (ethods

Difficulty: Easy

Keywords: market, research, 2ud&ment

13*. SSSSSSSSSSSS is a causa# method of forecastin& in which one variab#e is re#ated to one or more

variab#es by a #inear e1uation.

Answer: 8inear re&ression

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: #inear, re&ression, causa#

13+. The SSSSSSSSSSSS variab#e is the variab#e that one wants to forecast.

Answer: dependent

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: dependent, variab#e

144

Chapter 13 Forecasting

13/. SSSSSSSSSSSS are assumed to FcauseG the resu#ts that a forecaster wishes to predict.

Answer: <ndependent variab#es

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: independent, variab#e, cause

13. %DnE SSSSSSSSSSSS measures the direction and stren&th between the independent variab#e and the

dependent variab#e.

Answer: samp#e corre#ation coefficient, r

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: samp#e, corre#ation, coefficient, r, independent, dependent, variab#e

11. The SSSSSSSSSSSS measures the amount of variation in the dependent variab#e about its mean that is

e5p#ained by the re&ression #ine.

Answer: samp#e coefficient of determination, r,s1uared

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: samp#e, coefficient, determination, r,s1uared

12. %DnE SSSSSSSSSSSS forecast is a time,series method whereby the forecast for the ne5t period e1ua#s

the demand for the current period.

Answer: na=ve

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: na=ve, forecast, method

13. SSSSSSSSSSSS is a time,series method used to estimate the avera&e of a demand time series by

avera&in& the demand for the n most recent time periods.

Answer: 'imp#e movin& avera&e

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: simp#e, movin&, avera&e, time

1. SSSSSSSSSSSS is a method for incorporatin& a trend in an e5ponentia##y smoothed forecast.

Answer: Trend,ad2usted e5ponentia# smoothin&

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: trend, ad2usted, e5ponentia#, smoothin&

1$. SSSSSSSSSSSS is the difference found by subtractin& the forecast from actua# demand for a &iven

period.

Answer: "orecast error

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: forecast, error

145

Chapter 13 Forecasting

1). The dispersion of forecast errors is measured by both (%D and ('E, which behave different#y in

the way they emphasi4e errors. SSSSSSSSSSSS &ives #ar&er wei&ht to errors and SSSSSSSSSSSS &ives

sma##er wei&ht to errors.

Answer: ('E, (%D

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: Easy

Keywords: forecast, error, (%D, ('E, mean, abso#ute, deviation, s1uared

1*. SSSSSSSSSSSS are often the resu#t of ne&#ectin& or not accurate#y estimatin& patterns of demand

such as a trend, seasona#, or cyc#ica# pattern.

Answer: Bias errors

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: bias, error

1+. %DnE SSSSSSSSSSSS is a measure that indicates whether a method of forecastin& is accurate#y

predictin& actua# chan&es in demand.

Answer: trackin& si&na#

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: trackin&, si&na#, measure

1/. %DnE SSSSSSSSSSSS is a portion of data from more recent time periods that is used to test different

mode#s deve#oped from ear#ier time period data.

Answer: ho#dout set

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: ho#dout, set, data

1$3. SSSSSSSSSSSS are produced by avera&in& independent forecasts based on different methods or

different data, or both.

Answer: 6ombination forecasts

Reference: .sin& (u#tip#e Techni1ues

Difficulty: (oderate

Keywords: combination, forecast

1$1. SSSSSSSSSSSS se#ects the best forecast from a &roup of forecasts &enerated by individua#

techni1ues.

Answer: "ocus forecastin&

Reference: .sin& (u#tip#e Techni1ues

Difficulty: (oderate

Keywords: focus, forecastin&

1$2. % history fi#e of past demand wi## often be separated into two partsA the SSSSSSSSSSSS part wi##

ref#ect irre&u#ar demands.

Answer: nonbase DdataE

Reference: Puttin& it %## Toðer7 "orecastin& as a Process

Difficulty: (oderate

Keywords: forecastin&, process, nonbase, data, history

14"

Chapter 13 Forecasting

1$3. "orecastin& is aDnE SSSSSSSSSSSS that shou#d continua##y be reviewed for improvements.

Answer: DnestedE process

Reference: Puttin& it %## Toðer7 "orecastin& as a Process

Difficulty: (oderate

Keywords: forecastin&, process

S!RT A'S*ERS

1$. Discuss the combination of forecasts used by .ni#ever. <f they were forced to use on#y one

techni1ue, which wou#d be the most accurate and why?

Answer: .ni#ever uses a 6DP system deve#oped by (anu&istics to perform times,series Dand

possib#y causa#,mode#E forecastin&. These forecasts are then modified by 2ud&ment

techni1ues, inc#udin& sa#esforce estimates. %nswers wi## vary re&ardin& a sin&#e best

techni1ue, but students may be drawn toward a causa# mode# with predictors for a time

e#ement, advertisin& e5penditures and form of media, and other e#ements.

Reference: <ntroduction

Difficulty: (oderate

Keywords: time, series, causa#, 2ud&ment

1$$. >hy are forecasts for product fami#ies typica##y more accurate than forecasts for the individua# items

within a product fami#y?

Answer: (ore accurate forecasts are obtained for a &roup of items because the individua#

forecast errors for each item tend to cance# each other.

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: a&&re&ate, forecast, accuracy

1$). >hich forecastin& approaches wou#d you entertain for #on&,term forecasts?

Answer: 8on&,term forecastin& typica##y uses causa# or 2ud&ment forecastin& methods.

Reference: Desi&nin& the "orecastin& 'ystem

Difficulty: (oderate

Keywords: #on&, term, forecast

1$*. >hich forecastin& techni1ue wou#d you consider for techno#o&ica# forecasts?

Answer: < wou#d consider the De#phi method because techno#o&ica# chan&e takes p#ace at a rapid

pace and often the on#y way to make forecasts is to &et the opinion of e5perts who devote

their attention to those issues.

Reference: 0ud&ment (ethods

Difficulty: (oderate

Keywords: techno#o&ica#, De#phi, forecast

14#

Chapter 13 Forecasting

1$+. Pho Bu#ous, a Mietnamese restaurant in the bust#in& metropo#is of Edmond, has had &reat success

usin& forecastin& techni1ues to predict demand for their main menu items ever since they opened

their doors. Their forecast for #ast month was &ross#y inaccurate and so far this month, their forecast

appears to be 2ust as bad as #ast monthJs. <tJs a#ready time to prepare the forecast for ne5t month, what

shou#d they do about their mode#?

Answer: The answer depends on whether Pho Bu#ous be#ieves that #ast monthJs and this monthJs

resu#ts are aberrations or the start of somethin& new. Both causa# and time series techni1ues

assume that there has been no chan&e in how the wor#d works, that is, independent factors of

time or other variab#es wi## permit the forecaster to make accurate predictions about the

future. <f Pho Bu#ous be#ieves that there is a si&nificant chan&e in the system, for e5amp#e, a

new competitor in the Edmond restaurant scene, a si&nificant chan&e in popu#ation or in their

disposab#e income, then they mi&ht try mu#tip#e re&ression to inc#ude these factors or wei&ht

more recent data more heavi#y in a time,series mode# Dthe scenario isnJt specific about which

techni1ue they have used thus farE. Pho Bu#ous mi&ht a#so try a combination approach if they

fee# their situation has chan&ed si&nificant#y. On the other hand, if Pho Bu#ous fee#s that these

two months are not ref#ective of any ma2or paradi&m shift for the restaurant crowd in

Edmond, they cou#d continue to use the mode#DsE they have had success with in the past.

Reference: (u#tip#e 'ections

Difficulty: (oderate

Keywords: forecast, accuracy

1$/. E5p#ain how the va#ue of a#pha affects forecasts produced by e5ponentia# smoothin&.

Answer: The smoothin& constant a#pha a##ows recent demand va#ues to be emphasi4ed or

deemphasi4ed dependin& on how the forecaster wishes to incorporate previous va#ues. 8ar&er

va#ues emphasi4e recent #eve#s of demand and resu#t in forecasts more responsive to chan&es

in the under#yin& avera&e. 'ma##er a#pha va#ues treat past demand more uniform#y and resu#t

in more stab#e forecasts.

Reference: Time,'eries (ethods

Difficulty: (oderate

Keywords: a#pha, e5ponentia#, smoothin&

1)3. >hat is the difference between mean abso#ute deviation D(%DE and mean s1uared error D('EE?

Answer: Both (%D and ('E are measurements of the amount of forecast error, and sma##er

va#ues of both metrics ref#ect superior forecastin& methods. The difference between the two is

that (%D p#aces #ess emphasis on an out#ier whi#e ('E is more sensitive to one. % forecast

techni1ue that seeks to minimi4e ('E wi## have overa## forecast accuracy hurt by one

e5treme out#ier more than a forecast deve#oped usin& a (%D,minimi4in& techni1ue.

Reference: 6hoosin& a Time,'eries (ethod

Difficulty: (oderate

Keywords: (%D, ('E, mean, abso#ute, deviation, s1uared, error

14$

Chapter 13 Forecasting

1)1. @ow is a typica# forecastin& process simi#ar to the PD6% cyc#e?

Answer: The authors indicate that forecastin& is a process that shou#d be continua##y reviewed for

improvementsA the PD6% cyc#e provides one vehic#e for continuous improvement. The

authors present a si5 step cyc#e for forecastin&7 1E ad2ust the history fi#e, 2E prepare initia#

forecasts, 3E consensus meetin&s and co##aboration, E revise forecasts, $E review by the

operatin& committee, and )E fina#i4e and communicate the forecasts. The history fi#e

ad2ustment in step 1 provides a check of forecast accuracyA if resu#ts have been #ess than

ste##ar, then p#anners and forecasters wi## e5p#ore different techni1ues andOor independent

variab#es to prepare future forecasts. This approach c#ose#y para##e#s the PD6% cyc#e of

methodica##y tryin& a new approach and checkin& resu#ts before actin& system,wide.

Reference: Puttin& <t %## Toðer7 "orecastin& as a Process

Difficulty: (oderate

Keywords: PD6%, forecastin&, process

PR!(LEMS

1)2. 6a#cu#ate three forecasts usin& the fo##owin& data. "irst, for periods throu&h 13, deve#op the

e5ponentia##y smoothed forecasts usin& a forecast for period 3 DF3E of $.3 and an a#pha of 3..

'econd, ca#cu#ate the three,period movin&,avera&e forecast for periods throu&h 13. Third, ca#cu#ate

the wei&hted movin& avera&e for periods throu&h 13, usin& wei&hts of .*3, .23, and .13, with 3.*3

app#ied to the most recent data. 6a#cu#ate the mean abso#ute deviation D(%DE and the cumu#ative

sum of forecast error D6"EE for each forecastin& procedure. >hich forecastin& procedure wou#d you

se#ect? >hy?

M(nt. 1e+!n$

1 $

2 +

3 3

+

$ /

) $

* *

+ $3

/ )

13 *

14%

Chapter 13 Forecasting

Answer:

(onth Demand E5ponentia# Error %bso#ute

Deviation

'imp#e

(ovin&

%vera&e

Error %bso#ute

Deviation

>ei&hted

(ovin&

%vera&e

Error %bso#ute

Deviation

'moothin&

1 $

2 +

3 2 $.33

+ 3.+3 .23 .23 $.33 3.33 3.33 3.$ .$3 .$3

$ / $.+ 3.$2 3.$2 ).33 3.33 3.33 ).+ 2.23 2.23

) $ ).+/ *.11 *.11 ).33 *.)* *.)* +.1 $./3 $./3

* * /.*3 ,2.*3 2.*3 $3.33 ,3.33 3.33 $2. ,$.3 $.3

+ $3 +.) 1.3) 1.3) $3.33 3.33 3.33 +.) 1.3 1.3

/ ) /.1+ ,3.1+ 3.1+ $3.33 ,.33 .33 /.+ ,3.+3 3.+3

13 * *./1 ,3./1 3./1 *.)* ,3.)* 3.)* )./ 3.13 3.13

'um /.3* 23.32 $.33 22.33 ./3 22.23

(ean

1.3 3.2/ 3.*) 3.1 3.*3 3.33

E5ponentia# 'imp#e

(ovin&

%vera&e

>ei&hted

(ovin&

%vera&e

'moothin&

6"E /.3* $.33 ./3

(%D 3.2/ 3.1 3.33

.sin& (%D, the simp#e movin& avera&e is best. @owever, the wei&hted movin& avera&e does

better on 6"E.

Reference: (u#tip#e sections

Difficulty: (oderate

Keywords: (%D, time, series, 6"E, error, avera&e, e5ponentia#

15&

Chapter 13 Forecasting

1)3. 6a#cu#ate three forecasts usin& the fo##owin& data. "irst, for periods throu&h 13, deve#op the

e5ponentia##y smoothed forecasts usin& a forecast for period 3 DF3E of 123.3 and an a#pha of 3.3.

'econd, ca#cu#ate the three,period movin&,avera&e forecast for periods throu&h 13. Third, ca#cu#ate

the wei&hted movin& avera&e for periods throu&h 13, usin& wei&hts of .)3, .33, and .13. 6a#cu#ate

the mean abso#ute deviation D(%DE and the cumu#ative sum of forecast error D6"EE for each

forecastin& procedure. >hich forecastin& procedure wou#d you se#ect? >hy?

(onth Demand

1 123

2 11$

3 12$

11/

$ 12*

) 11

* 123

+ 12

/ 11)

13 13*

Answer:

(onth Demand E5ponentia# Error %bso#ute

Deviation

'imp#e

(ovin&

%vera&e

Error %bso#ute

Deviation

>ei&hted

(ovin&

%vera&e

Error %bso#ute

Deviation

'moothin&

1 123

2 11$

3 12$ 123.33

11/ 121.$3 ,2.$3 2.$3 123.33 ,1.33 1.33 121.$ ,2.$3 2.$3

$ 12* 123.*$ ).2$ ).2$ 11/.)* *.33 *.33 123. ).)3 ).)3

) 11 122.)3 ,+.)3 +.)3 123.)* ,/.)* /.)* 12. ,13.3 13.3

* 123 123.3 ,3.3 3.3 123.33 3.33 3.33 11+. 1.)3 1.)3

+ 12 123.33 3./* 3./* 123.33 3.)* 3.)* 11+./ $.13 $.13

/ 11) 121.22 ,$.22 $.22 11/.33 ,3.33 3.33 121.+ ,$.+3 $.+3

13 13* 11/.)$ 1*.3$ 1*.3$ 123.33 1*.33 1*.33 11+.+ 1+.23 1+.23

'um 11.1/ 3./$ 1.33 2.33 12.+3 22.23

(ean

1.)3 ).2+ 2.33 ).33 1.+3 *.1*

E5ponentia# 'imp#e

(ovin&

%vera&e

>ei&hted

(ovin&

%vera&e

'moothin&

6"E 11.1/ 1.33 12.+3

(%D ).2+ ).33 *.1*

.sin& (%D, the simp#e movin& avera&e is best. @owever, the e5ponentia# smoothin& does better

on 6"E.

Reference: (u#tip#e sections

Difficulty: (oderate

Keywords: time, series, error, 6"E, (%D, error, e5ponentia#, avera&e

151

Chapter 13 Forecasting

1). The marketin& department for a ma2or manufacturer tracks sa#es and advertisin& e5penditures each

month. Data from the past nine months and re&ression output appear in the fo##owin& tab#e. <nterpret

the e1uation coefficients and the va#ues for the coefficient of determination and the corre#ation

coefficient.

Month Sales (units)

Adertising

(!1"###)

1 860010 25

2 1340697 40

3 2020025 65

4 1410180 45

5 2170086 70

6 1780399 55

7 1560975 50

8 1130155 35

9 1910901 60

SUMMARY OUTPUT

Regression Statistics

Multiple R 0.997

R Su!re 0.995

A$%u&te$ R

Su!re 0.994

St!n$!r$ 'rr(r 3298.324

O)&er*!ti(n& 9

A2O3A

Df

Re-re&&i(n 1

Re&i$u!l 7

T(t!l 8

Coefficients

Intercept 12312.05

A$*erti&in-

4/100005 2945.21

Answer: The re&ression e1uation is7

y:aNb;

'a#es DunitsE:12,312.3$N2/$.21T%dvertisin& DQ1,333sE

The intercept of 12,312 su&&ests that if no money were spent on advertisin&, sa#es wou#d be

12,312 units for that month. The s#ope may be interpreted as for every Q1,333 spent on

advertisin&, sa#es increase by a #itt#e over 2,/$ units.

The corre#ation coefficient of 3.//* shows a very stron& positive re#ationship between the

independent and dependent variab#es. The samp#e coefficient of determination is 3.//$, so the

#eve# of advertisin& e5penditure e5p#ains //.$K of the variation in sa#es.

Reference: 6ausa# (ethods7 8inear !e&ression

Difficulty: (oderate

Keywords: re&ression, coefficient, determination, corre#ation

152

Chapter 13 Forecasting

1)$. % #oca# movin& company has co##ected data on the number of moves they have been asked to

perform over the past three years. (ovin& is hi&h#y seasona#, so the ownerOoperator, who is both

bur#y and hi&h#y educated, decides to app#y the mu#tip#icative seasona# method Dbased on a #inear

re&ression for tota# demandE to forecast the number of customers for the comin& year. >hat is his

forecast for each 1uarter?

233 233$ 233)

Ruarter Demand Ruarter Demand Ruarter Demand

1 23 1 2* 1 33

2 3 2 $ 2 $

3 $ 3 $$ 3 $$

33 3 3

Answer:

The seasona# factor ca#cu#ations for each year show7

2004 2004 2004 2005 2005 2005 2006 2006 2006 2006

Quarter Demand Se!& "!ct Quarter Demand Seas Fact Quarter Demand Seas Fact Avg SF

1 20 0.592 1 27 0.647 1 33 0.763 0.667

2 40 1.185 2 45 1.078 2 45 1.040 1.1014

3 45 1.333 3 55 1.317 3 55 1.272 1.307

4 30 0.889 4 40 0.958 4 40 0.925 0.924

The regression equation for total demand is y=120.33+19*year; for the fourth year

y=196.33. (This is assuming the regression is done in year sequence, i.e. year 1, year

2, year 3. If a regression is run using the actual year dates, the equation of the line is

y=-37936.7+19*year.) Both equations result in a forecast for 2007 of 196.33.

Dividing this total demand by 4 yields 49.08333.

Forecasts for the next four quarters are:

Reference: Time 'eries (ethods

Difficulty: @ard

Keywords: seasona#, forecast, mu#tip#icative

153

( )

( )

( )

( )

17 /.3+3 3.)* 32.*

27 /.3+3 1.13 $.3)

37 /.3+3 1.31 ).1$

7 /.3+3 3./2 $.3$

Quarter

Quarter

Quarter

Quarter

=

=

=

=

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