Assignment 2 Forecasting

1. The Highway Department is considering using a 6-month moving average (MA) to forecast
crew hours needed to repair roads month by month for the coming year. To test whether this
method is accurate, use last year’s data (shown in the following table) to predict the last 6
months’ crew hours to compare with the observed values. Start with the average of January
through June to compare with the actual value of 200 for July and so on through December.

Month Crew Hours

January 110
February 120
March 140
April 180
May 250
June 200
July 200
August 220
September 280
October 120
November 100
December 80

i. Prepare an analysis of the errors in using the 6-month MA as a predictor.

ii. Use a 3-period MA to forecast the last 6 months and compare directly to the 6-month
forecast developed the previously.

2. The following table presents data concerning the sales of minivans and minivan tires for 10
years. It is believed that the demand for minivan replacement tires is highly correlated with the
sales figures of minivans for the previous years. Based on these data which is a better predictor
of minivan tire sales— sales of minivans three years prior or four years prior?

Year t Minivan Sales Minivan Tire Sales

(in millions) (in millions)
1 10 4
2 12 6
3 11 7
4 9 5
5 10 8
6 12 7
7 10 5
8 9 7
9 8 8
10 7 6

3. The demand data for an item for 3 years is given in the table below. Find the forecast for the
Winter quarter of the fourth year using the seasonal forecasting model. Total demand in the
fourth year is expected to be 2212 units.

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Assignment 2 Forecasting

Quarter Year 1 Year 2 Year 3

Fall 110 135 180
Winter 240 355 500
Spring 600 750 830
Summer 450 540 610

4. Monthly sales of ten-grain bread at the local Whole Foods Market are given in the table below.
The initial demand was 175 for the month of December previous year. Use MAD to determine
the optimal value of exponential smoothening constant .

Period T 1 2 3 4 5 6 7 8 9 10 11 12
Month Jan. Feb. Mar. April May June July Aug. Sep. Oct. Nov. Dec.
Demand 151 152 132 161 182 192 174 159 183 169 175 181

5. Write a short note on The Delphi Method