1.

In general, how do sales forecasts based on surveys differ from forecasts based on mathematical
methods?
SOLUTION
Sales forecasts based on surveys and mathematical methods differ in several ways.
 Sales forecasts based on surveys rely on subjective opinions and perceptions of potential
customers, while forecasts based on mathematical methods rely on historical data, market trends,
and mathematical models.
 Surveys are more flexible and can capture the nuances of customer preferences and behavior, but
they can also suffer from biases and limitations.
 Mathematical models are more objective and can provide more accurate predictions, but they may
not account for unforeseen events and changes in the market.
 Additionally, surveys can be expensive and time-consuming, while mathematical methods require
advanced technical skills and knowledge. Ultimately, the choice between surveys and
mathematical methods depends on the specific circumstances of the market and the resources
available for forecasting.

2. Use exponential smoothing with a smoothing constant of 0.8 to predict sales based on the data below.
Then forecast sales with a smoothing constant of 0.2.

SOLUTION
First, we'll use exponential smoothing with a smoothing constant of 0.8 to forecast sales for year 2 through year 6
based on the data for year 1. Here's how we can do it:
 Let F(1) = 24,000,000 (the actual sales for year 1)
 For year 2: F(2) = 0.8 x 24,000,000 + 0.2 x F(1) = 0.8 x 24,000,000 + 0.2 x 24,000,000 = 24,800,000
 For year 3: F(3) = 0.8 x 32,000,000 + 0.2 x F(2) = 0.8 x 32,000,000 + 0.2 x 24,800,000 = 31,840,000
 For year 4: F(4) = 0.8 x 44,000,000 + 0.2 x F(3) = 0.8 x 44,000,000 + 0.2 x 31,840,000 = 40,096,000
 For year 5: F(5) = 0.8 x 24,000,000 + 0.2 x F(4) = 0.8 x 24,000,000 + 0.2 x 40,096,000 = 29,727,200
 For year 6: F(6) = 0.8 x 30,000,000 + 0.2 x F(5) = 0.8 x 30,000,000 + 0.2 x 29,727,200 = 29,981,760
Now, we'll use exponential smoothing with a smoothing constant of 0.2 to forecast sales for year 7 based
on the data from year 1 through year 6. Here's how we can do it:
 Let F(1) = 24,000,000 (the actual sales for year 1)
 For year 2: F(2) = 0.8 x 24,000,000 + 0.2 x F(1) = 24,800,000
 For year 3: F(3) = 0.8 x 32,000,000 + 0.2 x F(2) = 31,840,000
  For year 4: F(4) = 0.8 x 44,000,000 + 0.2 x F(3) = 40,096,000
 For year 5: F(5) = 0.8 x 24,000,000 + 0.2 x F(4) = 29,727,200
 For year 6: F(6) = 0.8 x 30,000,000 + 0.2 x F(5) = 29,981,760
 For year 7: F(7) = 0.2 x 42,000,000 + 0.8 x F(6) = 0.2 x 42,000,000 + 0.8 x 29,981,760 = 32,085,408
Therefore, the forecasted sales for year 7 using exponential smoothing with a smoothing constant of 0.2
is 32,085,408

3. The following regression model was developed by a professor to help the owner of a restaurant predict
sales:

Forecast sales if the owner decides to spend $500 on advertising and offers a coupon for $5 off one meal
for parties of two or more in a month. Forecast sales if the owner decides to spend $400 on advertising
and offers a coupon for $10 off one meal for parties of two or more in a month.
SOLUTION
 Using the regression model:
 Sales = 70.0 + 46.5X1 + 208.5X2
 where: X1 = Advertising expenditure per month X2 = Value of coupon
 To forecast sales for the first scenario, where the owner decides to spend $500 on advertising and
offer a coupon for $5 off one meal for parties of two or more in a month, we need to substitute the
values in the equation:
 Sales = 70.0 + 46.5(500) + 208.5(5) Sales = 70.0 + 23250 + 1042.5 Sales = $24,362.50
 Therefore, the forecasted sales for the first scenario are $24,362.50.
 Similarly, to forecast sales for the second scenario, where the owner decides to spend $400 on
advertising and offer a coupon for $10 off one meal for parties of two or more in a month, we
need to substitute the values in the equation:
 Sales = 70.0 + 46.5(400) + 208.5(10) Sales = 70.0 + 18600 + 2085 Sales = $20,755.00
Therefore, the forecasted sales for the second scenario are $20,755.00
4 A university professor developed a model for predicting the sales of windmills to supply power for
businesses and homes. Describe at least five factors that could be in the model.
SOLUTION
6. Factors that could be included in the model for predicting windmill sales to supply power for
businesses and homes are:
 Weather patterns in the area where the windmill will be installed, including wind speed, direction,
and frequency.
 The size and capacity of the windmill, which will affect the amount of power it can produce and the
number of homes or businesses it can supply.
 The cost of energy from alternative sources, such as coal, oil, natural gas, solar, and hydroelectric
power.
 The government regulations and incentives for using renewable energy sources like wind power.
 The local demand for electricity, including the number of homes and businesses in the area and their
energy consumption patterns