5-15

Data collected on the yearly demand for 50-pound

bags of fertilizer at Wallace Garden Supply are
shown in the following table. Develop a 3-year moving
average to forecast sales. Then estimate demand
again with a weighted moving average in which
sales in the most recent year are given a weight of 2
and sales in the other 2 years are each given a weight
of 1. Which method do you think is best?
Year
Demand
for
fertilizer
(1,000s of bags)
Weight
Average
FORECAST
SALES
ABSOLUTE VALUE OF
ERRORS (DEVIATION).
ACTUALFORECAST
(Moving Average)
1 4
2 6
3 4
4 5 4.66666667 6 0.333333333
5 10 5.000000 6.666666667 5
6 8 6.33333333 9.666666667 1.666666667
7 7 7.66666667 10.33333333 0.666666667
8 9 8.33333333 10.66666667 0.666666667
9 12 8.000000 11 4
10 14 9.33333333 13.33333333 4.666666667
11 15 11.6666667 16.33333333 3.333333333
=
Sum of |errors| 20.33333333
The moving average with weight is the better than the three year moving average method
because the error is less than 20.3
ABS
1
3.33
1.67
3.33
1.67
1
0.67
1.33
=
14
The moving average with weight is the better than the three year moving average method
5-19
Sales of Cool-Man air conditioners have grown
steadily during the past 5 years:
Year Sales Forecasts
1 450 410
2 495 422
3 518 443.90
4 563 466.13
5 584 495.19
6 ? 521.83
The sales manager had predicted, before the business
started, that year 1s sales would be 410 air conditioners.
Using exponential smoothing with a
weight of a= 0.30, develop forecasts for years 2
through 6.
5-27
Emergency calls to Winter Park, Floridas 911 system,
for the past 24 weeks are as follows:
Week Calls
The Exponentially
Smoothed Forecast
a= 0.1.
Reforecast a
= 0.6.
1 50 50.00 50.00
2 35 50.00 50.00
3 25 48.50 41.00
4 40 46.15 31.40
5 45 45.54 36.56
6 35 45.48 41.62
7 20 44.43 37.65
8 30 41.99 27.06
9 35 40.79 28.82
10 20 40.21 32.53
11 15 38.19 25.01
12 40 35.87 19.00
13 55 36.28 31.60
14 35 38.16 45.64
15 25 37.84 39.26
16 55 36.56 30.70
17 55 38.40 45.28
18 40 40.06 51.11
19 35 40.05 44.44
20 60 39.55 38.78
21 75 41.59 51.51
22 50 44.93 65.60
23 40 45.44 56.24
24 65 44.90 46.50
25 85 46.91 57.60
(a) Compute the exponentially smoothed forecast of
calls for each week. Assume an initial forecast of
50 calls in the first week and use a = 0.1. What
is the forecast for the 25th week? The forecast for the 25th week is 46.91
(b) Reforecast each period using a = 0.6.
(c) Actual calls during the 25th week were 85.
Which smoothing constant provides a superior
forecast?
The exponentially smoothed forecast of
0.6 is the better superior forecast, because
it is closer to the actual cost of 85.
5-36
In the past, Judy Holmess tire dealership sold an average
of 1,000 radials each year. In the past two
years, 200 and 250, respectively, were sold in fall,
350 and 300 in winter, 150 and 165 in spring, and
300 and 285 in summer. With a major expansion
planned, Judy projects sales next year to increase to
1,200 radials. What will the demand be each season?
Quarters Year 1 Year 2
Year
1 & 2
Average
Average
Season
Demand
Seasonal
Index
Average
Demand
for Next
Year
Year 3
Demand
Fall Quarter 200 250 225 250 0.9 300 270
Winter Quarter 350 300 325 250 1.3 300 390
Spring Quarter 150 165 157.5 250 0.63 300 189
Summer Quarter 300 285 292.5 250 1.17 300 351