1. Sales of individuals vacuum cleaners at R. Lowenthal Supply Co.

over the past13

months are as follows: (15 points)

SALES ($1,000s) MONTH SALES ($1,000s) MONTH

11 January 14 August
14 February 17 September
16 March 12 October
10 April 14 November
15 May 16 December
17 June 11 January
11 July

a) Using a moving average with three periods, determine the demand for vacuum
cleaners for next February.
b) Using a weighted moving average with three periods, determine the demand
for vacuum cleaners for February. Use 3, 2, and 1 for the weights of the most
recent, second most recent, and third most recent periods, respectively. For
example, if you were forecasting the demand for February, November would
have a weight of 1, December would have a weight of 2, and January would
have a weight of 3.

SALES ($1,000s) MONTH Moving Average Weighted Moving Average

(Sales) (Sales)
11 January
14 February
16 March
10 April 13.67 14.50
15 May 13.33 12.67
17 June 13.67 13.50
11 July 14.00 15.17
14 August 14.33 13.67
17 September 14.00 13.50
12 October 14.00 15.00
14 November 14.33 14.00
16 December 14.33 13.83
11 January 14.00 14.67
February 13.67 13.17
 c) Evaluate the accuracy of each of these methods.

Where MAD (mean absolute deviation) : Error = Σ abs(At – Ft) / n

SALES MONTH Moving Average Weighted Moving

($1,000s) (Sales) Error 1 Average Error 2
(Sales)
10 April 13.67 3.67 14.50 4.50
15 May 13.33 1.67 12.67 2.33
17 June 13.67 3.33 13.50 3.50
11 July 14.00 3.00 15.17 4.17
14 August 14.33 0.33 13.67 0.33
17 September 14.00 3.00 13.50 3.50
12 October 14.00 2.00 15.00 3.00
14 November 14.33 0.33 14.00 0.00
16 December 14.33 1.67 13.83 2.17
11 January 14.00 3.00 14.67 3.67
Total: 2.20 Total: 2.72

Mean absolute deviation for Moving ave is 2.20, which is better compared with that
of the weighted moving ave which is 2.72.

d) What other factors might R. Lowenthal consider in forecasting sales?

Some other factors that R. Lowenthal should consider in forecasting its sales include
preference of target market, technological advancements like smart cleaners and
robotics, and the increasing disposition of household to use low carbon footprint
alternatives to vacuum cleaners.

While moving average is a good tool for forecasting, it should be used in conjunction
with other forecasting tools.