Suppose that you are using the three-period simple moving average method to forecast sales, and sales have been increasing by 10% every period. Then your forecasts will be increasing by 10% every period.

Question

Quizplus · Accepted Answer

The three-period simple moving average method involves taking the average of the last three periods to forecast the next period. Since sales have been increasing by 10% every period, the most recent period will have the highest value and thus have the greatest influence on the forecast. As a result, the forecast will increase by 10% every period.

Suppose That You Are Using the Three-Period Simple Moving Average