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Multiple Choice
Ans: c
Section Ref: Introduction
Level: easy
Ans: d
Section Ref: Principles of Forecasting
Level: moderate
Ans: a
Section Ref: Principles of Forecasting
Level: moderate
Ans: b
Section Ref: Steps in the Forecasting Process
Level: moderate
5. Which of the following companies helps businesses use weather data to make their business
plans?
a) i2 technologies
b) Manugistics
c) Planalytics
d) Algorithmics
e) SAP
Ans: c
Section Ref: Types of Forecasting Methods
Level: hard
Ans: b
Section Ref: Types of Forecasting Methods
Level: moderate
Ans: b
Section Ref: Types of Forecasting Methods
Level: easy
Ans: c
Section Ref: Types of Forecasting Methods
Level: easy
Ans: d
Section Ref: Types of Forecasting Methods
Level: moderate
10. Which forecasting method is particular good for predicting technological changes and
scientific advances?
a) Market research
b) Executive opinion
c) Delphi method
d) Naïve method
e) Gamma method
Ans: c
Section Ref: Types of Forecasting Methods
Level: moderate
11. Which forecasting method is particularly good for determining customer preferences?
a) Market research
b) Executive opinion
c) Delphi method
d) Naïve method
e) Gamma method
Ans: a
Section Ref: Types of Forecasting Methods
Level: moderate
12. Which forecasting method suffers from the possibility of having one person’s opinion
dominate the forecast?
a) Market research
b) Executive opinion
c) Delphi method
d) Naïve method
e) Gamma method
Ans: b
Section Ref: Types of Forecasting Methods
Level: moderate
Ans: b
Section Ref: Types of Forecasting Methods
Level: moderate
Ans: c
Section Ref: Types of Forecasting Methods
Level: moderate
Ans: c
Section Ref: Types of Forecasting Methods
Level: moderate
Ans: e
Section Ref: Types of Forecasting Methods
Level: easy
18. Which of the following is the least useful sales forecasting model to use when sales
are increasing?
a) Trend adjusted exponential smoothing
b) Simple mean
c) Exponential smoothing
d) Weighted moving average
e) Naïve
Ans: b
Section Ref: Types of Forecasting Methods
Level: hard
19. Over the long term, which of the following forecasting models will likely require
carrying the least amount of data?
a) Naïve
b) Simple mean
c) Exponential smoothing
d) Weighted moving average
e) Moving average
Ans: a
Section Ref: Types of Forecasting Methods
Level: moderate
Ans: d
Section Ref: Types of Forecasting Methods
Level: easy
21. Which of the following is not considered to be one of the four basic patterns of time
series data?
a) Horizontal
b) Trend
c) Vertical
d) Seasonality
e) Cycle
Ans: c
Response: See pages 259-260
Level: easy
Ans: e
Section Ref: Time Series Models
Level: moderate
23. Which forecasting method assumes that next period’s forecast is equal to this period’s
actual value?
a) Simple mean
b) Ignorant
c) Basic
d) Naïve
e) Nescient
Ans: d
Section Ref: Time Series Models
Level: easy
24. The OM supervisor informs you, the researcher, that the data has a large standard
deviation. What data pattern would you expect to observe once you generated a time
series trend?
a) horizontal
b) seasonal
c) positive/negative trend
d) cycle
e) insufficient information to derive a valid response
Ans: e
Section Ref: Time Series Models
Level: moderate
25. Suppose that you are using the naïve forecasting method with trend to forecast sales.
If sales have been declining by 20% per week, and this week’s sales amounted to $200,
what would your forecast be for next week?
a) $200
b) $ 40
c) $240
d. $180
e) $160
Ans: e
Section Ref: Time Series Models
Level: moderate
26. Suppose that you are using the simple mean to make a forecast. This period’s
forecast was equal to 100 units, and it was based on 6 periods of demand. This period’s
actual demand was 86 units. What is your forecast for next period?
a) 98
b) 100
c) 93
d) 86
e) Not enough information is given to answer the question.
Ans: a
Section Ref: Time Series Models
Level: hard
27. Suppose that you are using the four-period simple moving average method to forecast
sales, and sales have been decreasing by 10% every period. How will your forecasts
perform?
a) Forecasts will be lower than actual.
b) Forecasts will be higher than actual.
c) Forecasts will equal actual.
d) Forecasts will be increasing.
e) Forecasts will be decreasing by 2.5% every period.
Ans: b
Section Ref: Time Series Models
Level: hard
28. Suppose that you are using the four-period weighted moving average forecasting
method to forecast sales and you know that sales will be increasing every period for the
foreseeable future. What of the following would be the best set of weights to use (listed
in order from the most recent period to four periods ago, respectively)?
a) 0.25, 0.25, 0.25, 0.25
b) 0.40, 0.30, 0.20, 0.10
c) 1.00, 0.00, 0.00, 0.00
d) 0.10, 0.20, 0.30, 0.40
e) 0.00, 0.00, 0.00, 1.00
Ans: c
Section Ref: Time Series Models
Level: hard
29. The following sales figures show actual sales over the identified time period. What
can be determined by comparing a simple mean forecast and a six month moving average
forecast
December 4,000
January 5,000
February 4,000
March 4,500
April 5,500
May 5,000
Ans: d
Section Ref: Time Series Models
Level: moderate
Ans: c
Section Ref: Time Series Models
Level: moderate
31. In exponential smoothing, what values can the smoothing constant, , have?
a) [ 1, 1]
b) [1, ]
c) [0, ]
d) [0, 1]
e) [ , ]
Ans: d
Section Ref: Time Series Models
Level: easy
32. In exponential smoothing, which of the following values for would generate the
most stable forecast?
a) 0.10
b) 0.25
c) 0.50
d) 0.75
e) 1.00
Ans: a
Section Ref: Time Series Models
Level: moderate
33. Suppose that you are interested in trend-adjusted exponential smoothing. Which of
the following values of the trend smoothing constant, , would most likely be seen in
practice?
a) 0.10
b) 0.50
c) 0.75
d) 0.90
e) 1.00
Ans: a
Section Ref: Time Series Models
Level: moderate
Ans: b
Section Ref: Causal Models
Level: moderate
Ans: c
Section Ref: CausalCausal Models
Level: moderate
36. What value of the correlation coefficient implies that there is a perfect positive linear
relationship between the two variables of a linear regression model?
a) 1
b) 0
c) 0.5
d) 1
e)
Ans: d
Section Ref: CausalCausal Models
Level: easy
37. In linear regression, an r2 of .984 implies what?
a) 98.4% of the variability of the independent variable is explained by the dependent variable
b) 98.4% of the variability of the dependent variable is explained by the independent variable
c) 1.6% of the variability of the independent variable is explained by the dependent variable
d) 1.6% of the variability of the dependent variable is explained by the independent variable
e) 99.2% of the variability of the dependent variable is explained by the independent variable
Ans: b
Section Ref: CausalCausal Models
Level: moderate
38. What value of the correlation coefficient implies that there is no relationship between
the two variables of a linear regression model?
a) 1
b) 0
c) 0.5
d) 1
e)
Ans: b
Section Ref: CausalCausal Models
Level: easy
39. What is the statistic that measures the direction and strength of the linear relationship
between two variables?
a) r2
b) Coefficient of variation
c) Variance
d) Coefficient of kurtosis
e) Correlation coefficient
Ans: e
Section Ref: CausalCausal Models
Level: moderate
40. Which of the following is true with respect to the correlation coefficient r?
a) r2 r
b) r2 | r |
c) r2 r
d) r2 | r |
e) r2 can never equal r
Ans: b
Section Ref: CausalCausal Models
Level: moderate
41. Which of the following values of the correlation coefficient implies that the value of
the dependent variable decreases as the value of the independent variable increases?
a) 0.2
b) 0
c) 0.2
d) 1
e) 0.5
Ans: a
Section Ref: CausalCausal Models
Level: easy
42. The following correlation coefficient values come from five different linear
regression models. Which model “fits” the data the best?
a) 0.99
b) 0.5
c) 0
d) 0.8
e) 1
Ans: e
Section Ref: CausalCausal Models
Level: moderate
Ans: e
Section Ref: Selecting The Right Forecasting Model
Level: moderate
44. Suppose that Sally’s company uses exponential smoothing to make forecasts. Further
suppose that last period’s demand forecast was for 20,000 units, and last period’s actual
demand was 21,000 units. Sally’s company uses a smoothing constant (α) equal to 40%.
What should be the forecast for this period?
a) 20,000
b) 21,000
c) 20,600
d) 20,400
e) 19,600
Ans: d
Section Ref: Time Series Models
Level: moderate
45. Suppose that Jane’s company uses exponential smoothing to make forecasts. Further
suppose that last period’s demand forecast was for 500 units, and last period’s actual
demand was 480 units. In addition, yesterday Jane found out that this period’s actual
demand will be for 550 units. Jane’s company uses an α value of .20. Today Jane’s boss
asked her to prepare a forecast for this period. What should that forecast be?
a) 504
b) 496
c) 510
d) 484
e) 550
Ans: c
Section Ref: Time Series Models
Level: hard
46. A firm has the following order history over the last 6 months.
January 120
February 95
March 100
April 75
May 100
June 50
What would be a 3-month weighted moving average forecast for July, using weights of
40% for the most recent month, 30% for the month preceding the most recent month, and
30% for the month preceding that one?
a) 75
b) 72.5
c) 50
d) 90
e) 106.5
Answer: b
Section Ref: Time Series Models
Level: moderate
47. What is the mean absolute deviation of the following forecasts?
Ans: c
Section Ref: Measuring Forecast Accuracy
Level: moderate
48. What is the mean absolute deviation and mean squared error of the following forecast
Day Sale
Sales Forecast
24 37
31 41
27 46
29 47
25 50
a) 13, 157
b) 14, 321
c) 16, 312
d) 17, 313
e) 18, 321
Ans: d
Section Ref: Measuring Forecast Accuracy
Level: moderate
Ans: c
Section Ref: Time Series Models
Level: hard
50. Consider the demand data listed below. What is the 4-month moving average
forecast for June?
Ans: c
Section Ref: Time Series Models
Level: moderate
51. Suppose that you want to set up a 3-month weighted moving average forecasting
system. You want the weights to be percentages (that add to 100%). Furthermore, you
want weights for the most recent two months to be equal but you want each of those
weights to be twice as large as the weight for the oldest month. What should the weight
be for the oldest month?
a) 33%
b) 25%
c) 80%
d) 50%
e) 20%
Ans: e
Section Ref: Time Series Models
Level: hard
52. Given the following data, use exponential smoothing (α = .2) to develop a demand
forecast for period 3. Assume the forecast for the initial period is 5. What is the
forecast?
Period Demand
1 7
2 9
a) 9.00
b) 3.72
c) 9.48
d) 5.00
e) 6.12
Ans: e
Section Ref: Time Series Models
Level: moderate
53. Which of the following forecasting methods would be best (most accurate) if demand
were rapidly decreasing?
a) 3-month moving average
b) 6-month moving average
c) 12-month moving average
d) Simple mean
e) Exponential smoothing with = 0.001
Ans: a
Section Ref: Types of Forecasting Methods
Level: hard
54. Suppose that you are using the exponential smoothing forecasting method, and this
period’s forecast (Ft) was 100% accurate (i.e., no error). If α = .5, which of the following
is definitely true?
a) Next period’s forecast will also be 100% accurate.
b) Next period’s forecast equals this period’s actual.
c) This period’s forecast must be thrown out, and next period’s forecast equals
Ft-1 + α (At-1 t-1).
d) Next period’s forecast equals 50% of this period’s forecast.
e) Next period’s forecast equals 50% more than this period’s forecast.
Ans: b
Section Ref: Time Series Models
Level: hard
55. A firm has had the following order history over the last 4 months:
November 140
December 80
January 100
February 150
What is the weighted moving average forecast for March, assuming a weight of 60% for
the most recent month, 30% for the month preceding the most recent month, and 10% for
the month preceding that one?
a) 117.5
b) 228.1
c) 118.0
d) 128.0
e) 132.4
Ans: d
Section Ref: Time Series Models
Level: moderate
Ans: b
Section Ref: Selecting the Right Forecasting Model
Level: moderate
Ans: a
Section Ref: Selecting the Right Forecasting Model
Level: moderate
Ans: e
Section Ref: Selecting the Right Forecasting Model
Level: moderate
59. Suppose that you are using exponential smoothing with = 0.5, and your initial
forecast 5 months ago was for 100 units. If the actual demand last month was 0 units,
which of the following is definitely true?
a) The forecast for this month should be 0.
b) The model blew up. You can’t use exponential smoothing anymore.
c) The forecast for last month was 0.
d) The forecast for this month should be 50.
e) We need more information to determine this month’s forecast.
Ans: e
Section Ref: Time Series Models
Level: hard
60. Suppose that you are using the four-period simple moving average method to forecast
sales, and sales have been increasing by 20% every period. How will your forecasts
perform?
a) Forecasts will be lower than actual.
b) Forecasts will be higher than actual.
c) Forecasts will equal actual.
d) Forecasts will be decreasing.
e) Forecasts will be increasing by 5.0% every period.
Ans: a
Section Ref: Time Series Models
Level: hard
61. Suppose that you are using the four-period simple moving average method to forecast
sales, and sales have been increasing by 40% every period. How will your forecasts
perform?
a) Forecasts will be increasing by 40.0% every period.
b) Forecasts will be higher than actual.
c) Forecasts will equal actual.
d) Forecasts will be decreasing.
e) Forecasts will be increasing by 10.0% every period.
Ans: a
Section Ref: Time Series Models
Level: hard
62. Suppose that you are using the naïve forecasting method with trend to forecast sales.
If sales have been increasing by 40% per month, and this month’s sales amounted to
$1200, what would your forecast be for next month?
a) $1200
b) $ 480
c) $1680
d. $ 720
e) $1600
Ans: c
Section Ref: Time Series Models
Level: moderate
63. Suppose that you are using the naïve forecasting method with trend to forecast sales.
Sales have been increasing by 10% per week. Two weeks ago, sales amounted to $100.
What should your forecast be for this week?
a) $100
b) $ 10
c) $110
d. $121
e) $120
Ans: d
Section Ref: Time Series Models
Level: moderate
64. Suppose that you are using the simple mean to make a forecast. This period’s
forecast was equal to 200 units, and it was based on 5 periods of demand. This period’s
actual demand was 300 units. What is your forecast for next period?
a) 217
b) 250
c) 260
d) 300
e) 200
Ans: a
Section Ref: Time Series Models
Level: hard
65. Suppose that you are using the simple mean to make a forecast. This period’s
forecast was equal to 1000 units, and it was based on 99 periods of demand. This
period’s actual demand was 0 units. What is your forecast for next period?
a) 1000
b) 990
c) 0
d) 1010
e) 999
Ans: b
Section Ref: Time Series Models
Level: hard
66. A firm has the following order history over the last 6 months.
January 120
February 95
March 100
April 75
May 100
June 50
67. What would be the 4-month simple moving average forecast for July?
a) 97.5
b) 325
c) 90
d) 81.25
e) 50
Ans: d
Section Ref: Time Series Models
Level: moderate
68. Given the following data, use exponential smoothing (α = .1) to develop a demand
forecast for period 3. Assume the forecast for the initial period is 500. What is the
forecast?
Period Demand
1 600
2 200
a) 569
b) 470
c) 541
d) 551
e) 479
Ans: e
Section Ref: Time Series Models
Level: moderate
Ans: a
Section Ref: Types of Forecasting Methods
Level: easy
70. Which of the following would NOT be a consideration for selecting a forecasting
software package?
a) How easy is the package to learn
b) Is it possible to implement new methods
c) Do you require repetitive forecasting
d) Does the supplier support a local conference
e) Is there any local support
Ans: d
Section Ref: Forecasting Software
Level: moderate
Ans: e
Section Ref: Combining Forecasts
Level: easy
72. Which of the following is not typically done jointly by CPFR trading partners?
a) set forecasts
b) plan production
c) replenish inventories
d) raise capital
e) evaluate their success in the marketplace
Ans: d
Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR)
Level: hard
Ans: a
Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR)
Level: moderate
74. “Inside information” is most likely garnered through which of the following
forecasting methods?
a) exponential smoothing
b) seasonal indexes
c) naïve
d) Delphi
e) multiple regression
Ans: d
Section Ref: Types of Forecasting Methods
Level: hard
75. Which of the following is not one of the nine steps utilized in the most complete form
of CPFR?
a) identify exceptions for order forecasts
b) create a sales forecast
c) create order forecast
d) create separate business plans
e) generate order
Ans: d
Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR)
Level: hard
True/False
1. Forecasts are more accurate for individual items than for groups or families of items.
Ans: False
Section Ref: Principles of Forecasting
Level: moderate
2. Forecasting demand and forecasting sales are the same thing.
Ans: False
Section Ref: Steps in the Forecasting Process
Level: moderate
Ans: True
Section Ref: Types of Forecasting Methods
Level: easy
4. Planalytics is a company that helps businesses use weather data to make their business plans.
Ans: True
Section Ref: Types of Forecasting Methods
Level: hard
Ans: False
Section Ref: Types of Forecasting Methods
Level: easy
6. With the Delphi method, a group of managers meets and collectively generates a
forecast.
Ans: False
Section Ref: Types of Forecasting Methods
Level: easy
7. The Delphi method of forecasting is preferred to the executive opinion method if an
important consideration is eliminating any one person’s dominant opinion.
Ans: True
Section Ref: Types of Forecasting Methods
Level: moderate
8. Time series models are generally more difficult to use than causal models.
Ans: False
Section Ref: Types of Forecasting Methods
Level: moderate
9. A cycle is any data pattern that regularly repeats itself and is constant in length.
Ans: False
Section Ref: Time Series Models
Level: moderate
Ans: True
Section Ref: Time Series Models
Level: moderate
11. The naïve forecasting method assumes that next period’s actual value will be equal to
this period’s forecast.
Ans: False
Section Ref: Time Series Models
Level: hard
12. The naïve forecasting method assumes that next period’s actual value will be equal to
this period’s actual value.
Ans: True
Section Ref: Time Series Models
Level: hard
13. The simple moving average forecasting method uses fewer periods of data than the
simple mean forecasting method does.
Ans: True
Section Ref: Time Series Models
Level: moderate
14. Suppose that you are using the three-period simple moving average method to
forecast sales, and sales have been increasing by 10% every period. Then your forecasts
will be increasing by 10% every period.
Ans: True
Section Ref: Time Series Models
Level: hard
15. Suppose that you are using the three-period simple moving average method to
forecast sales, and sales have been increasing by 10% every period. Then your forecasts
will be lower than the actual sales.
Ans: True
Section Ref: Time Series Models
Level: moderate
16. Moving average forecasts with a larger number of observations are more responsive than
those with a smaller number of observations.
Ans: False
Section Ref: Time Series Models
Level: moderate
17. Moving average forecasts with a smaller number of observations are more subject to random
changes in the data than those with a larger number of observations.
Ans: True
Section Ref: Time Series Models
Level: moderate
Ans: False
Section Ref: Selecting the Right Forecasting Model
Level: hard
19. Exponential smoothing forecasting methods requires a small amount of historical data.
Ans: True
Section Ref: Selecting the Right Forecasting Model
Level: hard
20. Studies have shown that combining forecasts can lead to forecast accuracy that is better than
that of the individual forecasts.
Ans: True
Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR)
Level: moderate
21. Focus forecasting needs to test the rule set once for the highest level of accuracy.
Ans: False
Section Ref: Focus Forecasting
Level: moderate
Ans: True
Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR)
Level: moderate
Ans: False
Section Ref: Forecasting Within OM: How It All Fits Together
24. Economics relies on forecasting to predict the duration of economic turning points.
Ans: True
Section Ref: Forecasting Across the Organization
Level: easy
Essay
1. Why are forecasts more accurate for groups or families of items rather than for
individual items?
Ans: individual high and low values can cancel each other out (offset each other), i.e.,
“risk pooling”
Section Ref: Principles of Forecasting
Level: moderate
Ans: 1. Decide what to forecast, 2. Evaluate and analyze appropriate data, 3. Select and
test the forecasting model, 4. Generate the forecast, 5. Monitor forecast accuracy
Section Ref: Principles of Forecasting
Level: moderate
Ans: It’s a forecasting method that has an objective to reach a consensus among a
group of experts while maintaining their anonymity.
Section Ref: Types of Forecasting Methods
Level: moderate
7. Explain the impact on forecasting that the number of observations used in a simple moving
average has.
Ans: The smaller the number of observations in the moving average, the more responsive the
forecast is to changes in demand. However, the forecast is also more subject to the random
changes in the data. If the data contain a lot of randomness, high responsiveness could lead
to greater errors. On the other hand, the larger the number of observations in the moving
average the less responsive the forecast is to changes in the demand, but also to the
randomness. These forecasts are more stable. One is not better than the other.
Section Ref: Time Series Models
Level: moderate
Ans: It is the statistic that measures the direction and strength of the linear
relationship between two variables.
Section Ref: CausalCausal Models
Level: moderate
9. Discuss why the degree of accuracy is important in selecting the right forecasting
model.
Ans: Depending on the situation some forecast estimates require general results or rough
forecast estimates. Often, higher levels of accuracy are required, which creates the need
for more advanced forecasting models.
Section Ref: Selecting the Right Forecasting Model
Level: moderate
Ans: Focus forecasting is based on the concept that simple rules have worked well in developing
good forecasts. The idea behind focus forecasting is to test these rules on past data and
evaluate how they perform. New rules can be added at any time, and old ones that have not
performed well can be eliminated.
12. What are the 9 steps utilized in the most complete form of CPFR?
Ans: (1) establish collaborative relationships, (2) create a joint business plan, (3) create a
sales forecast, (4) identify exceptions for sales forecasts, (5) resolve/collaborate on
exception items, (6) create order forecast, (7) identify exceptions for order forecast, (8)
resolve/collaborate on exception items, and (9) generate order
Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR)
Level: hard
Problems
1. Hoops, Inc. produces videos on the art of shooting in basketball. The firm has
experienced the following demand for the first 6 months of the year.
Month Demand
Jan. 4,000
Feb. 6,000
Mar. 10,000
Apr. 2,000
May 20,000
June 30,000
What is the forecast for July using a 5-month simple moving average forecast?
Ans: 13,600
Section Ref: Time Series Models
Level: moderate
2. Hoops, Inc., produces videos on the art of shooting in basketball. The firm has
experienced the following demand for the first 6 months of the year.
Month Demand
Jan. 4,000
Feb. 6,000
Mar. 10,000
Apr. 2,000
May 20,000
June 30,000
What is the forecast for July using a 4-month weighted moving average forecast, where
(1) the weight for the most recent month is three times more than the weight for the
period that’s four months in the past, (2) the weight for two periods ago is the same as the
weight for the most recent period, (3) the weight for three periods ago is the same as the
weight for the demand four periods ago, and (4) the weights sum to 100%?
3. Hoops, Inc., produces videos on the art of shooting in basketball. The firm has
experienced the following demand for the most recent four months.
Month Demand
Mar. 10,000
Apr. 2,000
May 20,000
June 30,000
Prepare an exponential smoothing forecast for July, using an value of .40. Initiate the
process by assuming that the forecast for March is 8,000 units.
Ans: 18,989
Section Ref: Time Series Models
Level: hard
4. The Freewheel motorcycle dealer in the Chicago area wants to be able to forecast
accurately the demand for the Freewheel Super Z12 motorcycle. From sales records, the
dealer has accumulated the following data for the second half of 2000.
Month Sales
July 10
August 15
September 23
October 44
November 54
December 36
5. John’s Office Supply Company has the following order history over the last 7 months.
April 65
May 180
June 30
July 90
August 120
September 190
October 70
Ans: 108.79
Section Ref: Time Series Models
Level: hard
6. John’s Office Supply Company has the following order history over the last 8 months.
April 50
May 75
June 160
July 120
August 80
September 120
October 180
November 90
Compute a 3-month weighted moving average forecast for December, with a weight of
65% for the most recent month, 25% for the month preceding the most recent month, and
10% for the month preceding that one.
7. Steve’s Steak House uses exponential smoothing with trend (alpha = .10 and beta =
.40) to forecast its weekly demand for chopped steak in the metro area. Average sales
have been 1000 steaks per week, and the recent trend has been an increase of 20 steaks
per week. Actual demand last week was for 1040 steaks. What should the forecast be for
this week?
Ans: 1042.8
Section Ref: Time Series Models
Level: hard
8. Joe’s Equipment Distributors sells “Low and Loud” brand lawnmowers. Total demand
in 2002 is expected to be 2000 units. Given the historical sales figures listed below,
derive a forecast for each quarter in 2002.
9. Central Heating needs to forecast the number of boilers they will sell in April. Using
the following data and an alpha of .3 how many boilers should they have on hand?
Boilers
sold forecast
Nov 12 13
Dec 13.5 12
Jan 14 14
Feb 16 15
Mar 17 18
10. Cover Me, Inc. sells umbrellas in three cities. Management assumes that annual
rainfall is the primary determinant of umbrella sales, and it wants to generate a linear
regression equation to estimate potential sales in other cities. Given the data below, what
is the regression equation?
Rainfall Sales
X Y
City A 36 in. 2300
City B 30 in. 2000
City C 12 in. 800
11. Hoops, Inc. has the following actual demand and forecasted demand data.
Ans: 1,518,100
Section Ref: Measuring Forecast Accuracy
Level: moderate
12. Annie’s Smart Dog annual fair concession stand operates for five days. Last year they sold
the following number of supreme smart dogs. Calculate (a) MAD, (MSE) and using a tracking
signal of+/- 8 determine if the forecast should be reviewed.
Day Sale
Sales Forecast
24 27
31 31
27 36
29 37
25 35
Ans: (a) 6, (b) 51 and (c) forecast should be reviewed as signal exceeds the +/- 8 range on day 5
Cumulative
Day Sale Deviation Tracking
Sales Forecast Error MAD MSE Deviation Signal
8 1.33
24 27 -3 3 9 -3 5 0.83
31 31 0 0 0 -3 2 0.33
27 36 -9 9 81 -12 -10 -1.67
29 37 -8 8 64 -20 -30 -5.00
25 35 -10 10 100 -30 -60 -10.00
6 51
Short Answer
Ans: vertical
Section Ref: Time Series Models
Level: moderate
2. Unlike MAD and MSE, the tracking signal's numerator allows positive and negative
forecast errors to ________________________
4. Companies that use collaborative planning, forecasting, and replenishment repeat its
steps ________________________ and ________________________ annually.
Ans: forecasts are rarely perfect, more accurate for groups than individual items, and for
shorter than longer time horizons
Section Ref: Collaborative Planning, Forecasting, and Replenishment (CPFR)
Level: moderate
Ans: (formula)
Section Ref: Time Series Models
Level: moderate
8. The first round of an exponential smoothing process is often begun by setting the
second period forecast equal to ________________________
Ans: forecasting
Section Ref: Principles of Forecasting
Level: easy
12. When developing the linear trend line you must calculate ____ before _____.
Ans: extension
Section Ref: Measuring Forecast Accuracy
Level: moderate