Chapter- 3 (FORECASTING)

1. What are some of the consequences of poor forecasts? Explain.

2. What advantages as a forecasting tool does exponential smoothing
have over moving averages?
3. What factors enter into the choice of a value for the smoothing
constant in exponential smoothing?
4. Contrast the terms sales and demand.
5. Contrast the reactive and proactive approaches to forecasting. Give
several examples of types of organizations or situations in which each
type is used.
6. Which type of forecasting approach, qualitative or quantitative, is
better?
7. Choose the type of forecasting technique (survey, Delphi, averaging,
seasonal naive, trend, or associative) that would be most appropriate
a)
b)
c)
d)

for predicting
Demand for Mothers Day greeting cards.
Popularity of a new television series.
Demand for vacations on the moon.
The impact of a price increase of 10 percent would have on sales of

orange marmalade.
e) Demand for toothpaste in a particular supermarket.
8. Explain the trade-off between responsiveness and stability in a
forecasting system that uses time series data.
9. A commercial bakery has recorded sales (in dozens) for three
products, as shown below:
Day
1
2
3
4
5
6
7
8
9
10
11

Blueberry Muffins
30
34
32
34
35
30
34
36
29
31
35

Cinnamon Buns
18
17
19
19
22
23
23
25
24
26
27

Cupcakes
45
26
27
23
22
48
29
20
14
18
47

12
13
14
15

31
37
34
33

28
29
31
33

26
27
24
22

a) Predict orders for the following day for each of the products using an
appropriate naive method. (Hint: Plot each data set)
b) What should the use of sales data instead of demand imply?

10.

National Scan, Inc. sells radio frequency inventory tags. Monthly

sale for a seven-month period were as follows:

Month
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.

Sales (000 units)

19
18
15
20
18
22
20

a. Forecast September sales volume using each of the following:

I. A five-month moving average
II.
Exponential smoothing with a smoothing constant equal to .20,
III.
IV.

assuming a march forecast of 19(000).

The nave approach
A weighted average using .60 for August .30 for July, and .10 for

June.
b. Which method seems least appropriate? Why? (Hint: Refer to your plot
from part a.)
c. What does use of the term sales rather than demand presume?
11.

An electrical contractors records during the last five weeks

indicate the number of job requests:

Week:

Requests:

20

22

18

21

22

Predict the number of requests for week 6 using each of these methods:
a. Naive
b. A four-period moving average.
c. Exponential smoothing with = .30. Use 20 for week 2 forecast.
12.

A tourist center is open on weekends (Friday, Saturday, and

Sunday). The owner-manager hopes to improve scheduling of part-time

employees by determining seasonal relatives for each of these days.
Data on recent traffic at the center have been tabulated and are shown
in the following table:

1
149
250
166

Friday
Saturday
Sunday

2
154
255
162

WEEK
3
152
260
171

4
150
268
173

5
159
273
176

6
163
276
183

a. Use nave and simple average technique to predict sales transactions

for the following week.
13.

Obtain estimates of daily relatives for the number of customers

at a restaurant for the evening meal, given the following data. (Hint:
Use a seven-day moving average.)
Day
1
2
3
4
5
6
7
8
9
10

Number Served
80
75
78
95
130
136
40
82
77
80

Day
15
16
17
18
19
20
21
22
23
24

Number Served
84
78
83
96
135
140
44
87
82
88

11
12
13
14

94
131
137
42

25
26
27
28

99
144
144
48