A computer software firm has experienced the following demand for its

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A computer software firm has experienced the following demand for its Powered By Docstoc
					Prof.Dr.Dr. M. Hulusi DEMIR           EASTERN MEDITERRANEAN UNIVERSITY
                                      FACULTY OF BUSINESS AND ECONOMICS
                                    DEPARTMENT OF BUSINESS ADMINISTRATION

            Homework 2: FORECASTING                (1)

            1. A manufacturing company has monthly demand for one of its products as follows:

                              MONTH        DEMAND
                              January         520    Develop a three-period average forecast and a three
                              February        490   period weighted moving average forecast with weights
                              March           550    of 5, 3 and 2 for the most recent demand values, in that
                              April           580    order.
                              May             600    Indicate which forecast would seem to be most accurate
                               June           420    Make a forecast of september by using both approaches.
                              July            510
                              August          610

            2. A computer software firm has experienced the following demand for its “Personal Finance”
               software package.

                              Period         Units
                              1              56
                              2              61    Develop an exponential smoothing forecast using
                              3              55    an alpha value of 0.40
                              4              70
                              5              66
                              6              65
                              7              72
                              8              75

            3. The head of Business Department at EMU wants to forecast the number of students who will
               enroll in production/operations management next semester in order to determine how many
               sections to schedule. The department has accumulated the following enrollment data for the
                past 8 semesters.

                              Semester       Students enrolled in POM
                                       1             80
                                       2             90
                                       3             70
                                       4             84
                                       5             100
                                       6             115
                                       7             98
                                       8             130


                              a) compute a 3-semester moving average forecast for semester 4 through 8
                b) Compute the exponentially smoothed forecast (alpha=0.20) for the
                   enrollment data.
                c) Compare two forecasts and indicate the most accurate.
                d) Make a forecast for the next semester (semester 9) with the most accurate
                   approach.

4. ABC Hardware handles spare parts for lawn-mowers. The following data were collected for
   one week in April when replacement for lawn-mower blades were in high demand.

                       Day           Demand
                        10              15
                        12              16
                        13              18
                        15              22
                        17              21
                        20              23
                        21              24

     Simulate a forecast using simple smoothing for the week, starting with F = 15 and alpha=0.2.
     Find also the forecast for the 8th day.
5. Demand for hockey skates at a local sports store for the past eight weeks has been


                      Week            Demand
                        1               122
                        2               130
                        3                98
                        4               121
                        5                96
                        6               152
                        7               113
                        8               124

Use a simple exponential smoothing model with alpha=0.6. Assume the forecast for Period 1 was
120. Make a forecast for period 9.


6.              Time   1   2 3 4              5 6        7   8       9 10     11 12
                Demand 10 14 19 26            31 35      39 44      51 55     61 54

            a) Assume F1 = 8 and α = 0.3 . Use an exponential smoothing factor to
               forecast demand in periods 2-13.
            b) Find the mean absolute deviation of exponential smoothing.
7.              November      Demand
                    10          20
                    11          28
                    12          38
                    13          52
                    14          62
                    15          70
              a)     Use a simple 3-period moving average to demand for 13 November-15
                     November.
              b)     Find the average error for that period.
              c)     Assume that F1=24 and = 0.6. Use an exponential smoothing method
                     to forecast demand in periods 11 November-15 November. Find the
                     average error.
              d)     Compare the methods and state which one you prefer and why?

8.   The monthly sales for Telco Batteries Inc., were as follows:
                       Month            Sales        Month        Sales
                       January          20           October         20
                       February         21           November        21
                       March            15           December        23
                       April            14
                       May              13
                       June             16
                       July             17
                       August           18
                       September        20
      Forecast past sales using each of the following;
                       a. A three-month moving average,
                       b. a 6-month weighted average using 1,1,1,2,2,2, and 3 with the heaviest
                          weights applied to the most recent months.
                       c. Exponential smoothing using an α = 0.3 and a January forecast of 20.
                       d. Which method you prefer and why?
                       e. using the method you chose, forecast January sales of the coming
                          year.
9.    Data collected on the yearly demand for 50-kg bags of fertilizer at Ilhandir Garden
      Supply are shown in the table below.
                                DEMAND FOR
                                FERTILIZER
             YEAR               (000 of BAGS)
             1                  4
             2                  6
             3                  4
             4                  5
             5                  10
             6                  8
             7                  7
             8                  9
             9                  12
             10                 14
             11                 15
     a. Develop a three-year moving average to forecast sales.
     b. Develop a four-year moving average for demand for fertilizer.
     c. Estimate demand again with weighted three-year moving average in which sales in the
        most recent year are given a weight of 2 and sales in other two years are each given a
        weight of 1.
     d. Three different forecasts were developed for the demand for fertilizer. These three
        forecasts are a three-year moving average, four-year moving average and a weighted
        moving average. Which one would you use and explain why?
     e. Use exponential smoothing with a smoothing constant of 0.3 to forecast the demand
        for fertilizer. Assume that last period’s (year’s) sales forecast for year 1 is 5 000 bags
        to begin the procedure.
     f. Would you prefer to use the exponential smoothing model or one of the above models.
Explain your choice. And according to your choice forecast the year 12.

				
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