Question 1

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 2012 at 10 percent and year 2013 at 90 percent, which of the following is the weighted moving average forecast for year 2014?
A)120
B)128
C)133
D)138
E)142

Accepted Answer

Forecast for 2014 = (110 x 0.1) + (130 x 0.9) = 11 + 117 = 128.

Question 2

As a consultant, you have been asked to generate a unit demand forecast for a product for year 2014 using exponential smoothing.The actual demand in year 2013 was 750.The forecast demand in year 2013 was 960.Using these data and a smoothing constant alpha of 0.3, which of the following is the resulting year 2014 forecast value?
A)766
B)813
C)897
D)1,023
E)1,120

Accepted Answer

Forecast = 960 + 0.3 x (960 - 750) = 897.

Question 3

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 these data?
A)1
B)3
C)5
D)15
E)123

Accepted Answer

MAD = ABS[(124 - 120) + (126 - 120) + (135 - 130)]/3 = 15/3 = 5.

Question 4

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

Accepted Answer

In the exponential smoothing method, only three pieces of data are needed to forecast the future: the most recent forecast, the actual demand that occurred for that forecast period, and a smoothing constant alpha.

Question 5

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

Accepted Answer

Simple exponential smoothing is a method that can be used for short-term forecasting, as it relies on historical data to make predictions for the near future. The other methods listed may be more appropriate for longer-term forecasting or for different types of data.

Question 6

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

Accepted Answer

The tracking signal is RSFE/MAD = 500/35 = 14.29.

Question 7

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 percent
C)The more rapid the growth, the higher the percentage
D)The more rapid the growth, the lower the percentage
E)50 percent or more

Accepted Answer

If a firm were experiencing growth, it would be desirable to have a higher reaction rate, perhaps 15 to 30 percentage points, to give greater importance to recent growth experience.The more rapid the growth, the higher the reaction rate should be.

Question 8

A company wants to generate a forecast for unit demand for year 2014 using exponential smoothing.The actual demand in year 2013 was 120.The forecast demand in year 2013 was 110.Using these data and a smoothing constant alpha of 0.1, which of the following is the resulting year 2014 forecast value?
A)100
B)110
C)111
D)114
E)120

Accepted Answer

Forecast = 110 + 0.1 x (120 - 110) = 111.

Question 9

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

Accepted Answer

Forecast = 230 + 0.1 x (250 - 230) = 232.

Question 10

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 percent
B)20 to 50 percent
C)20 to 80 percent
D)60 to 120 percent
E)90 to 100 percent

Accepted Answer

If a firm produced a standard item with relatively stable demand, the reaction rate to differences between actual and forecast demand would tend to be small, perhaps just 5 or 10 percentage points.

Question 11

A company has a MAD of 10.It wants to have a 99.7 percent control limit on its forecasting system.Its most recent tracking signal value is 3.1.What can the company conclude from this information?
A)The forecasting model is operating acceptably.
B)The forecasting model is out of control and needs to be corrected.
C)The MAD value is incorrect.
D)The upper control value is less than 20.
E)It is using an inappropriate forecasting methodology.

Accepted Answer

Tracking signal = RSFE/MAD; hence, 3.1 = RSFE/10 or RSFE = 3.1 x 10 = 31.MAD = 10, SD = 1.25 x MAD = 12.5.Because 99.7 percent corresponds to 3 standard deviations from the mean, RSFE would have to be higher than 3 x 12.5 or 37.5 for the forecasting model to be out of control.

Question 12

Which of the following is 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

Accepted Answer

Several common terms used to describe the degree of error are standard error, mean squared error (or variance), and mean absolute deviation.

Question 13

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

Accepted Answer

Mean absolute percent error (MAPE) gauges the error relative to the average demand.For example, if the MAD is 10 units and average demand is 20 units, the error is large and significant, but relatively insignificant on an average demand of 1,000 units.Because the same data are being used in the question, MAPE would be least when MAD was smallest.Therefore, A is the correct answer.

Question 14

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

Accepted Answer

Forecast = 1,100 + 0.3 x (1,100 - 1,000) = 1,030.

Question 15

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

Accepted Answer

Bias errors occur when a consistent mistake is made.Sources of bias include the failure to include the right variables, the use of the wrong relationships among variables, employing the wrong trend line, a mistaken shift in the seasonal demand from where it normally occurs, and the existence of some undetected secular trend.

Question 16

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 2014?
A)100.5
B)140.0
C)142.5
D)145.5
E)155.0

Accepted Answer

Forecast for 2014 = (100 + 120 + 140 + 210)/4 = 570/4 = 142.5.

Question 17

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 2014?
A)100.5
B)122.5
C)133.3
D)135.6
E)139.3

Accepted Answer

Forecast for 2014 = (130 + 110 + 160)/3 = 400/4 = 133.3.

Question 18

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 these data?
A)2.5
B)10
C)20
D)22.5
E)30

Accepted Answer

MAD = ABS[(100 - 120) + (105 - 120) + (135 - 120) + (150 - 120)]/4 = 80/4 = 20.

Question 19

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 2011 at 30 percent, year 2012 at 30 percent, and year 2013 at 40 percent, which of the following is the weighted moving average forecast for year 2014?
A)170
B)168
C)158
D)152
E)146

Accepted Answer

Forecast for 2014 = (160 x 0.3) + (140 x 0.3) + (170 x 0.4) = 158.

Question 20

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

Accepted Answer

Which forecasting model a firm should choose depends on (1) time horizon to forecast, (2) data availability, (3) accuracy required, (4) size of forecasting budget, and (5) availability of qualified personnel.

Quiz 18: Forecasting

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 2012 at 10 percent and year 2013 at 90 percent, which of the following is the weighted moving average forecast for year 2014?

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 these data?

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

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

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?

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 company wants to generate a forecast for unit demand for year 2014 using exponential smoothing.The actual demand in year 2013 was 120.The forecast demand in year 2013 was 110.Using these data and a smoothing constant alpha of 0.1, which of the following is the resulting year 2014 forecast value?

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?

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 company has a MAD of 10.It wants to have a 99.7 percent control limit on its forecasting system.Its most recent tracking signal value is 3.1.What can the company conclude from this information?

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

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?

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?

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

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 2014?

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 2014?

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 these data?

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