Dimal, Neil Laurrence A.

MA - 335

The data on the tables below are the demand in dozens of doughnuts of Krispy Doughnuts for the
past six weeks, make a forecast for week 7 using 3 month moving average, exponential
smoothing with an alpha of 0.10, and linear trend.

Exponential Smoothing 3-week moving average

Actual Absolute Absolute

Period Demand Forecast Error Forecast Error
January 200 200 0 -
February 256 200 56 -
March 287 205.6 81.4 -
April 282 213.74 68.26 247.67 34.33
May 247 220.57 26.43 275 28
June 252 223.21 28.79 272 20
July 226.09 260.33
Total 1524 260.88 82.33
Mean Absolute 52.17 27.44
Error (MAD)

Solutions:
(Exponential Smoothing)
Forecast for February = 200 + 0.10 (200 - 200)
= 200

Forecast for March = 200 + 0.10 (256 - 200)

= 205.6

Forecast for April = 205.6 + 0.10 (287 - 205.6)

= 213.74

Forecast for May = 213.74 + 0.10 (282 - 213.74)

= 220.57

Forecast for June = 220.57 + 0.10 (247 - 220.57)

= 223.21

Forecast for July = 223.21 + 0.10 (252 - 223.21)

= 226.09
Absolute error (January) = 200 - 200
 =0

Absolute error (February) = 256 - 200

= 56

Absolute error (March) = 287 - 205.6

= 81.4

Absolute error (April) = 282 - 231.74

= 68.26

Absolute error (May) = 247 - 220.57

= 26.43

Absolute error (June) = 252 - 223.21

= 28.79

(Mean Absolute Error or MAD)

= (56 + 81.4 + 68.26 + 26.43 + 28.79) ÷ 5
= 52.17

(3 month moving average)

April = (287 + 256 + 200) ÷ 3
= 247.67

May = (282 + 287 +256) ÷ 3

= 275

June= (247 + 282 + 287) ÷ 3

= 272

July = (252 + 247 + 282) ÷ 3

= 260.33

Absolute error (April) = 282 - 247.67

= 34.33

Absolute error (May) = 247 - 275

= 28

Absolute error (June) = 252 - 272

= 20
 Linear Trend

Period (x) Actual Demand (y) x*y x^2

January 200 200 1
February 256 512 4
March 287 861 9
April 282 1,128 16
May 247 1,235 25
June 252 1,512 36
Total 21 1,524 5,448 91

Solutions:

Slope (b)
= [n * ∑XY - (∑X) * (∑Y)] ÷ [ (n *∑X2) - (∑X)2]
= 6 x 5,448 - (21 x 1,524) ÷ 6 x 91 - 21^2
= 32,688 - 32,004 ÷ 105
= 6.51

Intercept (a)
=(∑Y - Slope * ∑X) ÷ n
= 1, 524 - (6.51 x 21) ÷ 6
= 231.22

Yt = 231.22 + 6.51t

1.What is your forecast for week 7 using 3 month moving average?

260.33

2. What is your forecast for week 7 using exponential smoothing?

226.09

3. Which is the better forecasting technique for the data, moving average or exponential
smoothing?
- According to the data above, the 3 week moving average of 27.44 is smaller than the
exponential smoothing of 52.17. As a result, the three-week
moving average is a far superior forecasting approach.

4. Using the 3-month moving average, what period did your forecast start?
- April

5. If 4 month moving average is used, what period must you start your forecast?
- May

6. In exponential smoothing, to what did you multiply the alpha of 0.10, actual demand or
forecast?
- Actual Demand

7. Given weights of 0.40 (most recent), 0.20,0.20 and 0.20 for the preceding periods respectively,
what is the forecast for week 7 using weighted moving average?

= (0.40 x 252) + (0.20 x 247) + (0.20 x 282) + (0.20 x287)

= 264.30

8. What is the linear trend equation?

Yt = 231.22 + 6.51t

9. What does your slope (b) indicate, increasing or decreasing demand?

- Because the slope is positive, it indicates that demand is increasing.

10. Using linear trend, what is the forecast for week 7?

Yt = 231.22 + 6.51 (7)
= 276.79