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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.
