Chapter 10 – Forecasting
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30. The exponential smoothing forecasting technique slowly responds to changes in the mean
level of demand when
31. When selecting a forecasting method, which of the following is true?
32. Using a simple three-period moving average forecast model, what is the forecast of
demand for week 6 given the historical demand levels shown below?
Week Demand
1 24
2 19
3 30
4 25
5 31
Feedback: 30 + 25 + 31 = 86. 86/3 = 28.67.
Chapter 10 – Forecasting
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33. Using a three-period weighted moving average model with weights of W1 = 0.5, W2 =
0.4, and W3 = 0.1, what is the forecast of demand for week 6 using the same demand
information from Problem 32?
34. Using a simple exponential smoothing model (alpha = 0.3), calculations for the most
recent period generated a forecast of 25.10 units. Actual demand for that period was 31 units.
What is the forecast of demand for the upcoming period?
35. Assume you discovered from historical records that simple linear regression is an
effective means of predicting the labor cost of some project tasks. You found that the weight
associated with an item (in pounds) produced in historical projects is an accurate and reliable
predictor of labor cost. You develop a linear equation expressing the relationship between
item weight and labor cost: estimated demand = 1,300 + 0.25x For an upcoming project that
includes the task of manufacturing an item weighing 7,000 pounds, estimate the task cost
using this regression equation.
Chapter 10 – Forecasting
36. Measured by the mean absolute deviation, which of the forecast methods (1, 2, or 3)
provides the highest degree of forecast accuracy for the five weeks of data shown below?
Week Demand Method 1 Method 2 Method 3
1 24 23 26 21
2 19 25 22 20
3 27 21 23 23
4 25 30 29 22
5 31 25 32 28
37. Which of the following is likely to reveal a bias effect resulting from the forecast method
in use?
38. Which of the following is NOT a measure of variance in the forecast error?
Chapter 10 – Forecasting
True/False Questions
45. All forecasts should include two estimates: an estimate of the demand and an estimate of
the forecasting error.
46. Quantitative forecasting methods should be used for predicting the demand patterns of
new products introduced in the market.
47. A time series forecast model includes only a level (average) term, representing past
average demand.
48. Tracking signal is the ratio between cumulative forecast error and the most recent estimate
of mean absolute deviation.
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53. Lengthening the forecast time horizon is a main method for counteracting forecast error.
54. The goal of forecasting is to select a method that delivers a balance between the lowest
possible error along with acceptable forecasting costs.
Chapter 10 – Forecasting
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Essay Questions
55. United Colors of Benetton is facing a serious problem. The global fashion garment
manufacturer and retailer is well known for its speed of new product introduction. The firm is
planning to introduce its 2017 summer collection and wants to estimate demand. Demand
levels from past years are shown below.
Year
Demand
(in millions)
Forecast
(in millions)
2008
150
140
2009
170
180
2010
190
190
2011
270
290
2012
220
270
2013
150
250
2014
290
260
2015
320
280
2016
300
310
Suggest a suitable forecasting method that Benetton could utilize while predicting demand for
the upcoming year. Describe the important factors that should be considered while selecting
the forecast method.
LO: 10.6
Topic: Selecting a Forecasting Method
Difficulty: 2 Moderate
AACSB: Reflective thinking
Bloom’s: Understand
Feedback: See below.
Chapter 10 – Forecasting
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56. Describe each of the five demand components in a time series (of past demand data).
LO: 10.3
Topic: Time Series Forecasting
Difficulty: 2 Moderate
AACSB: Reflective thinking, written communication
Bloom’s: Understand
Feedback: See below.