Exercise 1

KOMPWE Sdn Bhd is a large computer discount store that sells computers and printers in Kota Samarahan
where UNIMAS is located. It has collected historical data on computer sales and printer sales for the past 10
years as follows.

Year Computers sold Printers sold

2007 450 163
2008 650 255
2009 410 145
2010 550 239
2011 440 100
2012 530 253
2013 533 270
2014 550 280
2015 700 295
2016 623 310

ANSWER

Year Computers sold Printers sold XY X2 Y2

2007 450 163
2008 650 255
2009 410 145
2010 550 239
2011 440 100
2012 530 253
2013 533 270
2014 550 280
2015 700 295
2016 623 310
Total
Average

a) Develop a linear regression model relating the printer sales to computer sales.


= =

= =

Y=

b) Forecast the quantity of printers sold in 2017 if there are 950 computer sales.

If computer sales are, X = 950, then printers sales would be

Y=

Exercise 2

Employees at SDE company produce parts using precision machine tools according to exact specifications. The
quality control manager has checked the actual average times to produce this part for 10 different employees
during 20 days selected at random during the past month, and determined the corresponding percentage of
defective parts as follows;

Average time (min) % defective

21.6 3.1
22.5 4.6
23.1 2.7
24.6 1.8
22.8 3.5
23.7 3.2
20.9 3.7
19.7 4.5
24.5 0.8
26.7 1.2
20.8 2.7
18.9 4.5
21.4 2.8
23.7 1.9
23.8 1.1
24.9 1.2
19.8 2.3
19.7 5.1
21.2 3.6
20.8 4.2

ANSWER

Average time in minutes % defective XY X2 Y2

(X) (Y)
21.6 3.1
22.5 4.6
23.1 2.7
24.6 1.8
22.8 3.5
23.7 3.2
20.9 3.7
19.7 4.5
24.5 0.8
26.7 1.2
20.8 2.7
18.9 4.5
 21.4 2.8
23.7 1.9
23.8 1.1
24.9 1.2
19.8 2.3
19.7 5.1
21.2 3.6
20.8 4.2

a) Develop a linear regression model relating the percentage of defective to average time.

= =



= =
Y=

b) Analyze if there is a strong relationship between percentage of defective and average time.

= =
[ 2 ( )2 ] [ 2 ( )2

c) Forecast the percentage of defective if the average time is 23 minutes.

If average time are, X = 23 minutes , then percentage defective would be

Y=

Exercise 3

The following table shows the demand for product A at company KGH Sdn Bhd for year 2016.

Month Demand ( 103)

January 20
February 24
March 27
April 31
May 37
June 47
July 53
August 62
September 54
October 36
 November 32
December 29

a) Apply the three-month moving average to forecast the sales for the months of May through
December.

FMay = [DApril + DMarch + DFeb ] / 3 = [31 + 27 + 24 ] / 3 = 27.333

FJune = [DMay + DApril + DMarch ] / 3 =
FJuly =
FAug =
FSept=
FOct=
FNov=
FDec=

3 month moving average

Month Demand in Forecast of Error ( E ) = Absolute Error, (E/D)x100%
thousand (D) product (F) D-F E
Jan 2016 20
Feb 24
March 27
April 31
May 37
June 47
July 53
A 62
S 54
O 36
N 32
D 29
Total
Average

b) Apply the four-month moving average to forecast the sales for the months of May through December.
FMay = [DApril + DMarch + DFeb + DJan] / 4 = [31 + 27 + 24 + 20] / 4 = 25.5
FJune = [DMay + DApril + DMarch + DFeb] / 4 =
FJuly =
FAug =
FSept=
FOct=
FNov=
FDec=

4 month moving average

Month Demand in Forecast of Error (E ) = Absolute Error, (E/D)x100%
thousand (D) demand (F) D-F E
Jan 2016 20
Feb 24
March 27
April 31
May 37
June 47
July 53
A 62
S 54
O 36
N 32
D 29
Total
Average

c) The general manager is considering the above two methods for forecasting the demand in subsequent
months.
i. Compare the performance of the two methods by using the mean absolute deviation (MAD)
as the performance criterion. Which method would you recommend?

| |
MAD for 3 month moving average = =
8

| |
MAD for 4-months moving average = =
8
 ii. Compare the performance of the two methods by using the mean absolute percent error
(MAPE) as the performance criterion. Which method would you recommend?

[| |/ ]100%
MAPE for 3 month moving average = =
8

[| |/ ]100%
MAPE for 4 month moving average = =
8

d) Using the method recommended based on the MAD criterion, forecast the demand for product A for
January 2017.

e) Using the method recommended based on the MAPE criterion, forecast the demand for product A for
January 2017.

Exercise 4 (Reconsider exercise 1)

Demand for product A at company KGH Sdn Bhd for year 2016 is shown in the following table.

Month Demand ( 103)

January 20
February 24
March 27
April 31
May 37
June 47
July 53
August 62
September 54
October 36
November 32
December 29

a) Apply the three-month weighted moving average to forecast the sales for the months of May through
December. Use weights of (3/6), (2/6) and (1/6) , giving more weight to more recent data.

Ft+1 = W1Dt + W2Dt-1 + W3Dt-2

FMay = W1DApril + W2DMarch + W3DFeb
FMay = 3/6(27)+ 2/6(24) + 1/6(20) = 1/6 [(3x27) + (2x24) +(1x20)]=

FJune = W1DMay + W2DApril + W3DMarch

FJune =

FJuly =

FAug =

FSept=

FOct=

FNov=

FDec=

3 month weighted moving average

Month Demand in Forecast of Error (E ) = Absolute Error, (E/D)x100%
thousand (D) demand (F) D-F E
Jan 2016 20
Feb 24
March 27
April 31
May 37
June 47
July 53
A 62
S 54
O 36
N 32
D 29
Total
Average
b) Apply the exponential smoothing with = 0.6 to forecast the sales for the months of May through
December. Assume that the initial forecast for January was 22.

Although forecast is needed in May through December, we still need to forecast for the month of April,
March and February. The initial forecast for January is given as 22.

Ft+1 = Ft + [Dt -Ft]

FFeb = FJan + [DJan FJan] = 22+(0.6)[20-22] =

FMarch = FFeb + [DFeb FFeb ] =
FApril =
FMay =
FJune =
FJuly=
FAug=
FSept=
FOct=
FNov=
FDec=

Exponential smoothing
Month Demand in Forecast of Error (E ) = Absolute Error, (E/D)x100%
thousand (D) demand (F) D-F E
Jan 2016 20
Feb 24
March 27
April 31
May 37
June 47
July 53
A 62
S 54
O 36
N 32
D 29
 Total
Average

c) The general manager is considering two methods for forecasting the demand in subsequent months.
i. Compare the performance of the two methods by using the mean absolute deviation (MAD)
as the performance criterion. Which method would you recommend?

| |
MAD for 3 month weighted moving average = =
8
| |
MAD for exponential smoothing = =
8

ii. (MAPE) as the performance criterion. Which method would you recommend?

[| |/ ]100%
MAPE for 3 month weighted moving average = =
8

[| |/ ]100%
MAPE for exponential smoothing = =
8

d) Using the method recommended based on the MAD criterion, forecast the demand for product A for
January 2017.

e) Using the method recommended based on the MSE criterion, forecast the demand for product A for
January 2017.