Deck 3: Forecasting

Question 1

In the weighted moving average forecasting model the weights must add up to one times the number of data points.

Answer 1

False

Question 2

Time series forecasting models make predictions about the future based on analysis of past data.

Answer 2

True

Question 3

In a forecasting model using simple exponential smoothing the data pattern should remain stationary.

Answer 3

True

Question 4

In the simple exponential smoothing forecasting model you need at least 30 observations to set the smoothing constant alpha.

Question 5

Bayesian analysis is the simplest way to choose weights for the weighted moving average forecasting model.

Question 6

The equation for exponential smoothing states that the new forecast is equal to the old forecast plus the error of the old forecast.

Question 7

The value of the smoothing constant alpha in an exponential smoothing model is between 0 and 1.

Question 8

Cyclical influences on demand may come from occurrences such as political elections, war, or economic conditions.

Question 9

Exponential smoothing is always the best and most accurate of all forecasting models.

Question 10

Because the factors governing demand for products are very complex, all forecasts of demand contain error.

Question 11

Experience and trial and error are the simplest ways to choose weights for the weighted moving average forecasting model.

Question 12

Trend lines are usually the last things considered when developing a forecast.

Question 13

Exponential smoothing forecasts always lag behind the actual occurrence but can be corrected somewhat with a trend adjustment.

Question 14

Simple exponential smoothing lags changes in demand.

Question 15

Continual review and updating in light of new data is a forecasting technique called second-guessing.

Question 16

In a forecasting model using simple moving average, the shorter the time span used for calculating the moving average, the closer the average follows volatile trends.

Question 17

The weighted moving average forecasting model uses a weighting scheme to modify the effects of individual data points. This is its major advantage over the simple moving average model.

Question 18

In exponential smoothing, it is desirable to use a higher smoothing constant when forecasting demand for a product experiencing high growth.

Question 19

Cyclical influences on demand are often expressed graphically as a linear function that is either upward or downward sloping.

Question 20

A central premise of exponential smoothing is that more recent data is less indicative of the future than data from the distant past.

Question 21

A tracking signal (TS) can be calculated using the arithmetic sum of forecast deviations divided by the MAD.

Question 22

There are no differences in strategic and tactical forecasting. A forecast is a mathematical projection and its ultimate purpose should make no difference to the analyst.

Question 23

Random errors in forecasting occur when an undetected secular trend is not included in a forecasting model.

Question 24

Linear regression is not useful for aggregate planning.

Question 25

The standard error of the estimate of a linear regression is not useful for judging the fit between the data and the regression line when doing forecasts.

Question 26

The MAD is used to generate tracking signals.

Question 27

A time series is defined in the text as chronologically ordered data that may contain one or more components of demand variation: trend, seasonal, cyclical, autocorrelation, and random.

Question 28

For every forecasting problem there is one best forecasting technique.

Question 29

Qualitative forecasting techniques generally take advantage of the knowledge of experts and therefore do not require much judgment.

Question 30

A restriction in using linear regression is that it assumes that past data and future projections fall on or near a straight line.

Question 31

Random errors can be defined as those that cannot be explained by the forecast model being used.

Question 32

In forecasting, RSFE stands for "running sum of forecast errors."

Question 33

A good forecaster is one who develops special skills and experience at one forecasting technique and is capable of applying it to widely diverse situations.

Question 34

MAD statistics can be used to generate tracking signals.

Question 35

In causal relationship forecasting leading indicators are used to forecast occurrences.

Question 36

RSFE in forecasting stands for "reliable safety function error."

Question 37

Regression is a functional relationship between two or more correlated variables, where one or more variables are used to predict a single variable of interest.

Question 38

Decomposition of a time series means identifying and separating the time series data into its components.

Question 39

Multiple regression analysis uses several regression models to generate a forecast.

Question 40

Market research is a quantitative method of forecasting.

Question 41

It is difficult to identify the trend in time series data.

Question 42

In general, which forecasting time frame is best to detect general trends?

A) Short-term forecasts
B) Quick-time forecasts
C) Long range forecasts
D) Medium term forecasts
E) Rapid change forecasts

Question 43

Which of the following forecasting methodologies is considered a time series forecasting technique?

A) Simple moving average
B) Market research
C) Leading indicators
D) Historical analogy
E) Simulation

Question 44

Which of the following forecasting methods uses executive judgment as its primary component for forecasting?

A) Historical analogy
B) Time series analysis
C) Panel consensus
D) Market research
E) Linear regression

Question 45

In most cases, demand for products or services can be broken down into several components. Which of the following is not considered a component of demand?

A) Average demand for a period
B) A trend
C) Seasonal elements
D) Past data
E) Autocorrelation

Question 46

In most cases, demand for products or services can be broken into several components. Which of the following is considered a component of demand?

A) Forecast error
B) Autocorrelation
C) Previous demand
D) Consistent demand
E) Repeat demand

Question 47

Which of the following forecasting methodologies is considered a time series forecasting technique?

A) Delphi method
B) Exponential averaging
C) Simple movement smoothing
D) Weighted moving average
E) Simulation

Question 48

In business forecasting, what is usually considered a short-term time period?

A) Four weeks or less
B) More than three months
C) Six months or more
D) Less than three months
E) One year

Question 49

In business forecasting, what is usually considered a medium-term time period?

A) Six weeks to one year
B) Three months to two years
C) One to five years
D) One to six months
E) Six months to six years

Question 50

In time series data depicting demand which of the following is not considered a component of demand variation?

A) Trend
B) Seasonal
C) Cyclical
D) Variance
E) Autocorrelation

Question 51

In most cases, demand for products or services can be broken into several components. Which of the following is considered a component of demand?

A) Cyclical elements
B) Future demand
C) Past demand
D) Inconsistent demand
E) Level demand

Question 52

We usually associate the word "seasonal" with recurrent periods of repetitive activity that happen on other than an annual cycle.

Question 53

In general, which forecasting time frame compensates most effectively for random variation and short term changes?

A) Short-term forecasts
B) Quick-time forecasts
C) Long range forecasts
D) Medium term forecasts
E) Rapid change forecasts

Question 54

Which of the following is not one of the basic forecasting types discussed in the text?

A) Qualitative
B) Time series analysis
C) Causal relationships
D) Simulation
E) Force field analysis

Question 55

Which of the following forecasting methodologies is considered a causal forecasting technique?

A) Exponential smoothing
B) Weighted moving average
C) Linear regression
D) Historical analogy
E) Market research

Question 56

In decomposition of time series data it is relatively easy identify cycles and autocorrelation components.

Question 57

Which of the following forecasting methods is very dependent on selection of the right individuals who will judgmentally be used to actually generate the forecast?

A) Time series analysis
B) Simple moving average
C) Weighted moving average
D) Delphi method
E) Panel consensus

Question 58

In business forecasting, what is usually considered a long-term time period?

A) Three months or longer
B) Six months or longer
C) One year or longer
D) Two years or longer
E) Ten years or longer

Question 59

In general, which forecasting time frame best identifies seasonal effects?

A) Short-term forecasts
B) Quick-time forecasts
C) Long range forecasts
D) Medium term forecasts
E) Rapid change forecasts

Question 60

Which of the following forecasting methodologies is considered a qualitative forecasting technique?

A) Simple moving average
B) Market research
C) Linear regression
D) Exponential smoothing
E) Multiple regression

Question 61

A company wants to generate a forecast for unit demand for year 2018 using exponential smoothing. The actual demand in year 2017 was 120. The forecast demand in year 2017 was 110. Using this data and a smoothing constant alpha of 0.1, which of the following is the resulting year 2018 forecast value?

A) 100
B) 110
C) 111
D) 114
E) 120

Question 62

Given a prior forecast demand value of 1,100, a related actual demand value of 1,000, and a smoothing constant alpha of 0.3, what is the exponential smoothing forecast value?

A) 1,000
B) 1,030
C) 1,070
D) 1,130
E) 970

Question 63

If a firm produced a product that was experiencing growth in demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model would tend to be which of the following?

A) Close to zero.
B) A very low percentage, less than 10%.
C) The more rapid the growth, the higher the percentage.
D) The more rapid the growth, the lower the percentage.
E) 50% or more.

Question 64

A company wants to forecast demand using the simple moving average. If the company uses four prior yearly sales values , which of the following is the simple moving average forecast for year 2018?

A) 100.5
B) 140.0
C) 142.5
D) 145.5
E) 155.0

Question 65

If you were selecting from a variety of forecasting models based on MAD, which of the following MAD values from the same data would reflect the most accurate model?

A) 0.2
B) 0.8
C) 1.0
D) 10.0
E) 100.0

Question 66

Which of the following is a possible source of bias error in forecasting?

A) Failing to include the right variables
B) Using the wrong forecasting method
C) Employing less sophisticated analysts than necessary
D) Using incorrect data
E) Using standard deviation rather than MAD

Question 67

As a consultant you have been asked to generate a unit demand forecast for a product for year 2018 using exponential smoothing. The actual demand in year 2017 was 750. The forecast demand in year 2017 was 960. Using this data and a smoothing constant alpha of 0.3, which of the following is the resulting year 2018 forecast value?

A) 766
B) 813
C) 897
D) 1,023
E) 1,120

Question 68

Which of the following are used to describe the degree of error?

A) Weighted moving average
B) Regression
C) Moving average
D) Forecast as a percent of actual
E) Mean absolute deviation

Question 69

A company wants to forecast demand using the weighted moving average. If the company uses two prior yearly sales values , and we want to weight year 2016 at 10% and year 2017 at 90%, which of the following is the weighted moving average forecast for year 2018?

A) 120
B) 128
C) 133
D) 138
E) 142

Question 70

Which of the following considerations is not a factor in deciding which forecasting model a firm should choose?

A) Time horizon to forecast
B) Product
C) Accuracy required
D) Data availability
E) Analyst availability

Question 71

The exponential smoothing method requires which of the following data to forecast the future?

A) The most recent forecast
B) Precise actual demand for the past several years
C) The value of the smoothing constant delta
D) Overall industry demand data
E) Tracking values

Question 72

Which one of the following are among the major reasons that exponential smoothing has become well accepted as a forecasting technique?

A) Accurate and easy to use
B) Sophistication of analysis
C) Predicts turning points
D) Captures patterns in historical data
E) Ability to forecast lagging data trends

Question 73

Which of the following forecasting methods can be used for short-term forecasting?

A) Simple exponential smoothing
B) Delphi technique
C) Market research
D) Hoskins-Hamilton smoothing
E) Serial regression

Question 74

A company wants to forecast demand using the simple moving average. If the company uses three prior yearly sales values , which of the following is the simple moving average forecast for year 2018?

A) 100.5
B) 122.5
C) 133.3
D) 135.6
E) 139.3

Question 75

Given a prior forecast demand value of 230, a related actual demand value of 250, and a smoothing constant alpha of 0.1, what is the exponential smoothing forecast value for the following period?

A) 230
B) 232
C) 238
D) 248
E) 250

Question 76

A company has actual unit demand for three consecutive years of 124, 126, and 135. The respective forecasts for the same three years are 120, 120, and 130. Which of the following is the resulting MAD value that can be computed from this data?

A) 1
B) 3
C) 5
D) 15
E) 123

Question 77

A company has actual unit demand for four consecutive years of 100, 105, 135, and 150. The respective forecasts were 120 for all four years. Which of the following is the resulting MAD value that can be computed from this data?

A) 2.5
B) 10
C) 20
D) 22.5
E) 30

Question 78

A company wants to forecast demand using the weighted moving average. If the company uses three prior yearly sales values , and we want to weight year 2014 at 30%, year 2015 at 30% and year 2016 at 40%, which of the following is the weighted moving average forecast for year 2018?

A) 170
B) 168
C) 158
D) 152
E) 146

Question 79

If a firm produced a standard item with relatively stable demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model would tend to be in which of the following ranges?

A) 5% to 10%
B) 20% to 50%
C) 20% to 80%
D) 60% to 120%
E) 90% to 100%

Question 80

A company has calculated its running sum of forecast errors to be 500 and its mean absolute deviation is exactly 35. Which of the following is the company's tracking signal?

A) Cannot be calculated based on this information
B) About 14.3
C) More than 35
D) Exactly 35
E) About 0.07