Deck 14: Estimating Potentials and Forecasting Sales

Question 1

Time series projections cannot be improved by making adjustments to eliminate seasonal effects.

Answer 1

False

Question 2

Potential sales are the predictions of the actual volume that is expected in the future time period.

Answer 2

False

Question 3

The jury of executive opinion method can be done fairly quickly and allows the inclusion of many subjective factors.

Answer 3

True

Question 4

The Buying Power Index expresses sales potentials in absolute rather than relative terms.

Question 5

For best results, always seasonally adjust time series data.

Question 6

The sales budget is usually prepared before the sales forecast.

Question 7

Actual sales are normally equal to potential figures.

Question 8

The Buying Power Index includes such factors as disposable personal income, retail sales, and populations.

Question 9

"Sales potential" represents the sales volume a firm expects to achieve.

Question 10

Managers rarely need forecasts for designing sales territories.

Question 11

When forecasting sales, leading indicators work well for products whose sales are influenced by basic changes in the economy.

Question 12

With the sales force composite method, salespeople project sales volumes for customers in their own territory, and then the aggregated estimates are reviewed by higher management.

Question 13

Actual industry sales are usually less than market potential.

Question 14

Leading indicators are typically better than other forecasting techniques in predicting turns in a series of sales figures.

Question 15

The sales force composite method is especially popular with consumer goods firms because optimistic and conservative forecasts balance out due to the large number of customers.

Question 16

Sales force composite methods involve regression analysis.

Question 17

Business market potentials can be computed from data made available through the U.S. Census of Manufacturers.

Question 18

The estimation of sales potential can be made using such things as the Buying Power Index and NAICS codes.

Question 19

Potentials are the minimum possible sales for all sellers of goods or services.

Question 20

The Buying Power Index is a widely employed measure of sales potential for business markets.

Question 21

The key step in deriving linear regression equations is finding values for the coefficients (a, b) that give the line that best fits the data.

Question 22

What is ironic about the moving average method is that it really doesn't move.

Question 23

An important feature of the moving average technique is its ability to emphasize recent data and systematically discount old information.

Question 24

The naïve approach is the simplest quantitative forecasting technique.

Question 25

As a sales analyst, if you wish to compare forecasting accuracy across several time periods, the percentage forecasting error formula [% error = (forecast - actual)/actual] should be used.

Question 26

A limitation of simple regression forecasting is the assumption that sales follow a linear pattern.

Question 27

"MAPE" stands for Mean Absolute Percentage Exponentiation.

Question 28

An important aspect of exponential smoothing is its ability to emphasize recent data and systematically discount old information.

Question 29

When using the trend projection method, the analyst estimates trend from past data and adds this figure to current sales to obtain a forecast.

Question 30

Exponential smoothing assumes that the future will be an average of past achievements.

Question 31

When forecasting time series data with cyclical patterns, an analyst using simple regression can base the forecasting equation on the logarithms of the data.

Question 32

When using moving averages it is important to determine the ideal number of periods to use.

Question 33

When there is a strong trend in a time series, a moving average forecast always lags behind the trend; that is, it dampens the effect of a strong trend.

Question 34

Forecasts prepared with the percentage rate of change approach will normally be higher or lower than those obtained by other projective techniques.

Question 35

Although many firms use seasonal adjustments, they do not significantly reduce forecasting errors.

Question 36

A minimum of two periods of data are needed to use the moving average method.

Question 37

Sales forecasting using a moving average takes several recent periods of sales and uses the figures as a prediction of sales in the next period.

Question 38

A smoothing constant of .8 in exponential smoothing gives a fairly low weight (20 percent) to current sales.

Question 39

The major decision with exponential smoothing forecasts is determining the ideal number of periods to include in the average.

Question 40

At least three periods of data are needed for a moving average.

Question 41

The actual sales levels achieved in any period are determined by which of the following?

A) the intensity of the company's marketing program
B) actions of competition
C) general economic conditions
D) both a and b of the above
E) all of the above

Question 42

The main consideration with forecasting by ____________ is that it is difficult to teach someone how to forecast using this method.

A) sales force composite
B) jury of executive opinion
C) customer surveys
D) leading indicators
E) none of the above

Question 43

Which of the following sales forecast methods uses historical data the least when making a forecast?

A) multiple regression
B) sales force composite
C) linear regression
D) moving average
E) exponential smoothing

Question 44

The easiest way of estimating the number of buyers for a consumer product is:

A) conducting a telephone survey of a representative population.
B) conducting a mail survey of representative population.
C) consulting secondary sources.
D) all of the above.
E) none of the above.

Question 45

The jury of executive opinion:

A) is rarely used by today's business firms.
B) is one of the faster methods of forecasting sales.
C) relies on customer surveys.
D) is the most accurate sales forecasting method.
E) both a and c are correct.

Question 46

The Buying Power Index expresses sales potential in:

A) relative terms.
B) average terms.
C) absolute terms.
D) real terms.
E) none of the above.

Question 47

Soliciting the judgment of a group of experienced managers to obtain sales estimates for future time periods is known as:

A) econometrics.
B) jury of executive opinion.
C) regression.
D) surveys of buying intentions.
E) naïve approach.

Question 48

Salespeople projecting sales volume for customers in their own territory is known as:

A) jury of executive opinion.
B) sales force composite.
C) time series index.
D) regression.
E) naïve approach.

Question 49

NAICS stands for:

A) North American Industry Classification System.
B) National Annual Industrial Classification System.
C) North American Independent Classification System.
D) National Annual Industry Classification System.
E) North American Industry Category System.

Question 50

Remember the Buying Power Index? Given Bloomington, IN has .00015% of the U.S. retail sales but only .0002% of the U.S. population, we can conclude the following:

A) People are most likely driving in from smaller surrounding areas to shop in Bloomington.
B) The disposable personal income in Bloomington is well above the national average.
C) It is unlikely that people are driving from surrounding communities to shop in Bloomington.
D) Bloomington's percentage of U.S. retail sales multiplied by its percentage of the U.S. population determines its buying power index.
E) none of the above.

Question 51

Regression methods are generally more suitable for short range forecasts.

Question 52

Traditional Drug Company is the sole manufacturer of a frequently-prescribed antidepressant drug which is sold over the counter in drug stores. For their Midwestern sales region;
Effective Buying Income = .569%
Total Retail Sales = .728%
Total Population = .582%
What is the Midwestern Buying Power Index?

A) .651
B) .623
C) .619
D) .598
E) It cannot be calculated from the information given.

Question 53

The subjective sales forecasting method that firms use most regularly is:

A) industry survey.
B) intention to buy survey.
C) sales force composite.
D) jury of executive opinion.
E) naïve approach.

Question 54

All of the following are factors in devising a Buying Power Index except:

A) percentage of disposable personal income.
B) percentage of industrial sales.
C) percentage of retail sales.
D) percentage of U.S. population.
E) all of the above.

Question 55

One advantage of using multiple regression is that it tends to forecast accurately without using a lot of historical data.

Question 56

One of the difficult problems with linear regression is knowing how much past data to include in the calculation of the forecast.

Question 57

The market share of an organization is measured by which of the following ratios?

A) company sales to industry sales
B) company sales to company potential
C) company potential to market potential
D) company sales to market potential
E) none of the above

Question 58

Pat Murphy is working on a special project for the marketing manager of the Television Land Company. The marketing manager asked Pat to determine the unit potential demand for color television sets in Indianapolis. All the data Pat was given is provided below. What is the correct unit potential demand that pat should have calculated? (Within errors of rounding) Given:
Per capital expenditures on TV sets per year = 180
Average price = $500
Population of Indianapolis = 1,000,000
Proportion spent on TV sets = .40
Proportion spent on black and white sets = .35
Proportion spent on color TV sets = .65

A) 504
B) 693
C) 936
D) 1287
E) It cannot be calculated from the information given.

Question 59

Predictions of the actual volume that is expected in a future time period can best be expressed as:

A) econometrics.
B) regression.
C) sales potential.
D) forecasting.
E) none of the above.

Question 60

The city of Sacramento has 0.165% of U.S. income, 0.166% of retail sales, and 0.142% of the U.S. population. Sacramento's buying power index is:

A) 0.825
B) 0.498
C) 0.284
D) 0.161
E) none of the above

Question 61

In using __________, the analyst estimates trends from past data and adds this figure to current sales to obtain a forecast.

A) the naïve approach
B) the trend projection approach
C) exponential smoothing
D) the moving average approach
E) none of the above

Question 62

Actual sales in quarters 1 and 2 are 50 and 60, respectively. What is the percentage forecasting error for quarter 2 using a naïve approach?

A) 83.3%
B) 20.9%
C) 16.7%
D) 12.5%
E) none of the above

Question 63

Given the following sales data, answer the following questions.
Mean of 3-Year Sales


278/12 = 23.16
What is the seasonal index for quarter 1?

A) .87
B) 2.30
C) .38
D) .50

Question 64

The forecasting method which assumes nothing is going to change and the best estimate for the future is the current level of sales is known as the:

A) trend projection.
B) moving average.
C) exponential smoothing.
D) naïve approach.
E) linear regression analysis.

Question 65

Which of the following are not directly involved in estimating potential and forecasting sales?

A) seasonally adjusting data.
B) selecting forecasting methods.
C) checking forecasting accuracy.
D) b and c of the above.
E) All of the above are involved.

Question 66

When forecasting sales for a particular product, all of the following are possible leading indicators except:

A) new building permits.
B) historical data for that product.
C) Dow Jones industrial average.
D) new orders for durable goods.
E) all of the above are leading indicators.

Question 67

Time series projections can often be improved by making adjustments to eliminate monthly or quarterly effects. The adjustments are best known as:

A) seasonal adjustments.
B) temporary adjustments.
C) general adjustments.
D) counter adjustments.
E) none of the above.

Question 68

Marketing analyst, Sharon Wilson, uses seasonal adjustments to improve the accuracy of her time series projections for the Ice Cream Palace Company. Given the following data, determine the seasonal index for the first quarter. (Within errors of rounding)

Average Quarterly Sales - 78.69

A) .69
B) .76
C) .84
D) .91
E) none of the above

Question 69

Trend forecasting methods including the percentage rate of change and the unit rate of change:

A) are widely used by managers.
B) can produce large forecasting errors when sales change direction.
C) are relatively easy to use.
D) are often combined to improve moving average and exponential smoothing forecasts.
E) All of the above.

Question 70

Use the following data to find the MAPE for periods 2 through 4:

A) 4.34%
B) 4.16%
C) 3.33%
D) 2.50%
E) none of the above

Question 71

Taking the average volume achieved in several recent periods and using this data as a prediction of sales in the next period is synonymous with which forecasting technique:

A) trend projection.
B) moving average.
C) exponential smoothing.
D) naïve approach.
E) chain ratio method.

Question 72

With leading indicators:

A) general time series are used to confirm trends in sales.
B) it is important to find an independent time series that is closely related to company sales.
C) it is difficult to convert changes in a leading indicator into a company sales forecast.
D) you want a series that is available several months in advance of actual company sales.
E) Answers b and d are correct.

Question 73

MAPE stands for:

A) Mean Absolute Percentage Error.
B) Mode Absolute Proportion Exponent.
C) Median Absolute Percentage Error.
D) More Advanced Programming Estimation.
E) Mean Advanced Programming Exponential.

Question 74

Using the following data, what is the season index number for period 3?

A) 0.86
B) 0.97
C) 1.56
D) 2.33
E) None of the above (answer is 1.16)

Question 75

Sales forecasts for new products may be based on any of the following procedures except:

A) executive judgments.
B) moving averages.
C) market tests.
D) surveys.
E) all of the above may be used.

Question 76

Where there is a strong trend in sales:

A) a trend adjusted forecast will give lower forecasting errors.
B) naïve forecasting methods show surprising accuracy.
C) percentage rate of change methods prove superior to trend forecast methods.
D) two of the above, and they are a and c.
E) two of the above, and they are b and c.

Question 77

Which of the following is/are true regarding seasonal adjustments?

A) It is difficult to do and generally not worth the time and effort required.
B) It produces no more accuracy in forecasting than more subjective approaches.
C) They are difficult and infrequently used in business.
D) None of the above.
E) All of the above.

Question 78

The forecasting technique known for its ability to emphasize recent data and systematically discount old information is known as:

A) trend projection.
B) moving average.
C) exponential smoothing.
D) naïve approach.
E) linear regression analysis.

Question 79

Which of the following forecasting methods tends to lag behind actual sales when there is a strong trend?

A) naïve forecast
B) unit rate of change
C) moving average
D) both a and b are correct
E) both a and c are correct

Question 80

Seasonal adjustments to sales data:

A) should always be used.
B) are rarely of value.
C) tend to complicate the sales forecasting process.
D) do not have to be used with annual data.
E) Answers c and d are correct.