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 lower than the actual sales.

Question

Quizplus · Accepted Answer

The three-period simple moving average method involves taking the average of the past three periods to forecast future periods. If sales have been increasing by 10% each period, then the moving average will not fully capture the increase, resulting in lower forecasts than actual sales.

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