(a) Level or Horizontal Pattern: (b) Trend Pattern:

Data follow a horizontal pattern Data are progressively increasing (shown)

around the mean or decreasing
Quantity Quantity

Time Time
(c) Seasonal Pattern: (d) Cycle:
Data exhibit a regularly repeating pattern Data increase or decrease over time
Quantity Quantity

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Time (quarters) Time (quarters)
 Example 8.3, 8.4
Forecasting with Simple Moving Averages
800
700
600
Sales Volume

500
Actual
400 Values
5-Period
300 MA
200
3-Period
100 MA

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Actual 3-Period MA 5-Period MA

 54

52

50
Sales Volume

48

46

44

42

40
1 2 3 4 5 6 7 8 9 10
Time Period

Actual Forecast with Alpha = 0.10 Forecast with Alpha = 0.60

 A B C D E F G H
4 Weeks (X) Sales (Y)
5 1 2300
6 2 2400
7 3 2300
8 4 2500
9 B10: =SLOPE(B5:B8,A5:A8)
10 Slope Coefficient (b) 50.00 B11: =INTERCEPT(B5:B8,A5:A8)
11 Intercept Coefficient (a) 2250.00
12
13
14 Example 8.9
15 Linear Regression with Time as an Independent Variable
16 2550
17
18 2500
19
Sales ($ thousands)

20 2450
21 y = 50x + 2250
22 2400
23
2350
24
25 2300
26
27 2250
28
29 2200
30 1 2 3 4
31 Week
32
Actual Sales Linear Trend Line
33
34
 A B C D E F
4 Enrollment (thousands)
5 Quarter Year 1 Year 2
6 Fall 24 26
7 Winter 23 22
8 Spring 19 19
9 Summer 14 17 C10: =SUM(C6:C9)
10 Total Demand 80 84 C11: =C10/4
11 Average Demand per Quarter 20 21
12 B16: =B6/B$11
(copied down)
13 Calculate Seasonal Indices
14 Individual
C16: =C6/C$11
15 Quarter Year 1 Year 2 Average (copied down)
16 Fall 1.200 1.238 1.219
17 Winter 1.150 1.048 1.099 D16: =(B16+C16)/2
18 Spring 0.950 0.905 0.927 (copied down)

19 Summer 0.700 0.810 0.755

20
21 Calculate Forecast for Next Year
22 Estimated annual enrollment 90000 B23: =B22/4
23 Average per Quarter 22500
24
25 Expected Quarterly Enrollment, Based on Historical Seasonal Indices
26 Quarter Forecast B27: =B$23*D16
27 Fall 27429 (copied down)
28 Winter 24723
29 Spring 20866
30 Summer 16982
 Linear Regression Equation:
Y = a + bX
Dependent Variable Y

Actual Values

} Error
(difference between
actual value and
regression equation)

Independent Variable X
 A B C D E F G H
Advertising
Dollars Sales
4 Year (thousands) (thousands)
5 1 32 130
6 2 52 151
7 3 50 150
8 4 55 158 C9: =AVERAGE(C5:C8)
9 Average 47.25 147.25
10 C11: =SLOPE(C5:C8,B5:B8)
11 Slope Coefficient (b) 1.15 C12: =INTERCEPT(C5:C8,B5:B8)
12 Intercept Coefficient (a) 92.83
13
14
Example 8.11
15
16 Sales (thousands) vs Advertising (thousands)
17 180
18 160
19
140
Sales ($ thousands)

20
21 120 y = 1.15x + 92.83
22 100
23
24 80
25 60
26
40
27
28 20
29 0
30 30 40 50 60
31
Advertising Dollars ($ thousands)
32
33
 A B C D E F G H I J
4 Method A Method B
Actual Absolute Absolute
5 Month Sales Forecast Error Error Error2 Forecast Error Error Error2
6 January 30 28 2 2 4 30 0 0 0
7 February 26 25 1 1 1 28 -2 2 4
8 March 32 32 0 0 0 36 -4 4 16
9 April 29 30 -1 1 1 30 -1 1 1
10 May 31 30 1 1 1 28 3 3 9
11 Totals 3 5 7 -4 10 30
12
13 MAD = 1.0 MAD = 2.0
14 MSE = 1.4 MSE = 6.0
23
24 Key Formulas (similar formulas for method B)
25 D6 =$B6-C6 (copied down)
26 E6 =ABS(D6) (copied down)
27 F6 =D6^2 (copied down)
28 E13 =AVERAGE(E6:E10)
29 E14 =AVERAGE(F6:F10)
 A B C D E F G H I
4 alpha = 0.30
5
6 Forecasts

Actual 3-month Exponential C11: =AVERAGE(B8:B10)

7 Month Sales Moving Avg Smoothing (copied down)
8 1 56
9 2 76 D11: =D$4*B10+(1-D$4)*D10
10 3 58 61 61 (copied down)

11 4 67 63.33 60.10
12 5 75 67.00 62.17
13 6 76 66.67 66.02
14 7 72.67 69.01
15
16
Solved Problem 8.1
17
18 Moving Average and Exponential Smoothing Forecasts
19 80
20
70
21
22 60
23
24 50
Sales

25
26 40
27 30
28
29 20
30
31 10
32
0
33
1 2 3 4 5 6 7
34
35 Month
36
37 Actual Sales 3-month Moving Avg Exponential Smoothing
38