Exercise on Forecasting

Question 1
The State University athletic department wants to develop its budget for the coming year using a forecast
for football attendance. Football attendance accounts for the largest portion of its revenues, and the
athletic director believes attendance is directly related to the number of wins by the team. The business
manager has accumulated total annual average attendance figures for the past eight years.

Wins Attendance
4 36,300
6 40,100
6 41,200
8 53,000
6 44,000
7 45,600
5 39,000
7 47,500

Given the number of returning starters and the strength of the schedule, the athletic director believes the
team will win at least seven games next year. Develop a simple regression equation for this data to
forecast attendance for this level of success.

Question 2
A local building products store has accumulated sales data for 2 x 4 lumber (in board feet) and the
number of building permits in its area for the past 10 months:

Months Building permits, x Lumber sales (1000 square of

board feet), y
1 8 12.6
2 12 16.3
3 7 9.3
4 9 11.5
5 15 18.1
6 6 7.6
7 5 6.2
8 8 14.2
9 101 15
10 12 17.8
Develop a linear regression model for these data and determine the strength of the linear relationship
using correlation. If the model appears to be relatively strong, determine the forecast for lumber given
ten building permits in the next quarter.

Question 3
The owner of a computer store rents printers to some of her preferred customers. She is interested in
arriving at a forecast of rentals so that she can order the correct quantities of supplies that go with the
printers. Data for the last 10 weeks are shown here.

Week Rentals
1 15
2 16
3 24
4 18
5 23
6 20
7 24
8 27
9 18
10 16

Prepare a forecast for weeks 6 through 10 by using a 4-week moving average. What is the forecast for
week 11?

Question 4
The Heartland Produce Company sells and delivers food produce to restaurants and catering services
within a 100-mile radius of its warehouse. The food supply business is competitive, and the ability to
deliver orders promptly is a factor in getting new customers and keeping old ones. The manager of the
company wants to be certain enough drivers and vehicles are available to deliver orders promptly and
they have adequate inventory in stock. Therefore, the manager wants to be able to forecast the number
of orders that will occur during the next month (i.e., to forecast the demand for deliveries).
From records of delivery orders, management has accumulated the following data for the past 10 months,
from which it wants to compute three- and five-month moving averages.
 Month Orders
January 120
February 90
March 100
April 75
May 110
June 50
July 75
August 130
September 110
October 90

a. Prepare a forecast for April through October by using a 3-month moving average. What is the
forecast for November 11?
a. Prepare a forecast for April through October by using a 5month moving average. What is the
forecast for November?

Question 5
Sales for the past 12 months at Computer Success are given here.

Month Sales (RM)

January 3000
February 3400
March 3700
April 4100
May 4700
June 5700
July 6300
August 7200
September 6400
October 4600
November 4200
December 3900

a. Use a three-month moving average to forecast the sales for the months May through December.
b. Use a four-month moving average to forecast the sales for the months May through December.
c. Compare the performance of the two methods by using the mean absolute deviation (MAD) as the
performance criterion. Which method would you recommend?
d. Compare the performance of the two methods by using the mean absolute percent error (MAPE) as
the performance criterion. Which method would you recommend?
e. Compare the performance of the two methods by using the mean squared error (MSE) as the
performance criterion. Which method would you recommend?

Question 6
Karl’s Copiers sells and repairs photocopy machines. The manager needs weekly forecasts of service
calls so that he can schedule service personnel. Use the actual demand in the first period for the forecast
for the first week so error measurement begins in the second week. The manager uses exponential
smoothing with a = 0.20. Forecast the number of calls for week 6.

Week Actual service calls

1 29
2 27
3 41
4 18
5 33

Question 7
Consider the sales data for Computer Success given in Question 5
a. Use a 3-month weighted moving average to forecast the sales for the months April through December.
Use weights of (4/8), (3/8), and (1/8), giving more weight to more recent data. Start error measurement
in April.
b. Use exponential smoothing with a = 0.6 to forecast the sales for the months February through
December. Assume that the initial forecast for January was $3,200. Start error measurement in April.
c. Compare the performance of the two methods by using the mean absolute deviation (MAD) as the
performance criterion, with error measurement beginning in April. Which method would you
recommend?
d. Compare the performance of the two methods by using the mean absolute percent error (MAPE) as
the performance criterion, with error measurement beginning in April. Which method would you
recommend?
e. Compare the performance of the two methods by using the mean squared error (MSE) as the
performance criterion, with error measurement beginning in April. Which method would you
recommend?
Question 8
The number of heart surgeries performed at Pusat Jantung Hospital has increased steadily over the past
several years. The hospital’s administration is seeking the best method to forecast the demand for such
surgeries in year 6. The data for the past five years are shown.

Year Demand
1 45
2 50
3 52
4 56
5 58

The hospital’s administration is considering the following forecasting methods. Begin error
measurement in year 3 so all methods are compared for the same years.
i. Exponential smoothing, with = 0.6. Let the initial forecast for year 1 be 45, the same as the actual
demand.
ii. Exponential smoothing, with = 0.9. Let the initial forecast for year 1 be 45, the same as the actual
demand.
iii. Two-year moving average.
iv. Two-year weighted moving average, using weights 0.6 and 0.4, with more recent data given more
weight.
v. If MAD is the performance criterion chosen by the administration, which forecasting method should
it choose?
vi. If MSE is the performance criterion chosen by the administration, which forecasting method should
it choose?
vii. If MAPE is the performance criterion chosen by the administration, which forecasting method should
it choose?