Krajewski TIF Chapter 13

Chapter 13 Forecasting
Chapter
13
Forecasting
TRUE/FALSE
1. The repeated observations of demand for a product or service in their order of occurrence form a
pattern known as a time series.
Answer: True
Reference: Demand Patterns
Difficulty: Easy
Keywords: time, series, repeated
2. One of the basic time series patterns is trend.
Answer: True
Difficulty: Easy
Keywords: time, series, pattern, trend
3. One of the basic time series patterns is random.
Answer: True
Difficulty: Easy
Keywords: time, series, pattern, random
. !andom variation is an aspect of demand that increases the accuracy of the forecast.
Answer: "a#se
Difficulty: Easy
Keywords: random, variation, accuracy
$. %&&re&ation is the act of c#usterin& severa# simi#ar products or services.
Answer: True
Reference: Desi&nin& the "orecastin& 'ystem
Difficulty: (oderate
Keywords: a&&re&ation, c#usterin&
). %&&re&atin& products or services to&ether &enera##y decreases the forecast accuracy.
Answer: "a#se
Keywords: a&&re&ation, forecast, accuracy
111
*. % forecast of sa#es revenue has #itt#e va#ue.
Answer: True
Keywords: forecast, sa#es, revenue
+. % stock,keepin& unit is an individua# item or product that has an identifyin& code and is he#d in
inventory somewhere a#on& the va#ue chain.
Answer: True
Keywords: '-., stock,keepin&, unit
/. 0ud&ment methods of forecastin& are 1uantitative methods that use historica# data on independent
variab#es to predict demand.
Answer: "a#se
Keywords: 2ud&ment, method, forecast, data
13. Time,series ana#ysis is a statistica# approach that re#ies heavi#y on historica# demand data to pro2ect
the future si4e of demand.
Answer: True
Keywords: time, series, forecast
11. The causa# method of forecastin& uses historica# data on dependent variab#es such as promotiona#
campai&ns and economic conditions to predict the demand of independent variab#es such as sa#es
vo#ume.
Answer: "a#se
Keywords: causa#, method, dependent, independent
12. Time,series ana#ysis is most often used for #on&,term forecasts.
Answer: "a#se
Keywords: time, series, #on&,term
13. "or time hori4ons e5ceedin& two years, forecasts are usua##y deve#oped for individua# products.
Answer: "a#se
Keywords: time, hori4on, forecast, a&&re&ate
112
1. 'a#esforce estimates are e5treme#y usefu# for techno#o&ica# forecastin&.
Answer: "a#se
Reference: 0ud&ment (ethods
Keywords: sa#es, force, techno#o&y, forecast
1$. Techno#o&ica# forecastin& is an app#ication of e5ecutive opinion in #i&ht of the difficu#ties in keepin&
abreast of the #atest advances in techno#o&y.
Answer: True
Keywords: techno#o&ica#, forecastin&, e5ecutive, opinion
1). (arket research is a systematic approach to determine consumer interest by &ainin& consensus from a
&roup of e5perts whi#e maintainin& their anonymity.
Answer: "a#se
Keywords: market, research, De#phi
1*. 0ud&ment methods of forecastin& shou#d never be used with 1uantitative forecastin& methods.
Answer: "a#se
Keywords: 2ud&ment, 1uantitative, method
1+. The De#phi method is a process of &ainin& consensus from a &roup of e5perts by debate and votin&
throu&hout severa# rounds of &roup discussion #ed by a moderator.
Answer: "a#se
Keywords: 2ud&ment, De#phi, method
1/. !e&ression e1uations with a coefficient of determination c#ose to 4ero are e5treme#y accurate because
they have #itt#e forecast error.
Answer: "a#se
Reference: 6ausa# (ethods7 8inear !e&ression
Keywords: re&ression, coefficient, determination
23. The c#oser the va#ue of the samp#e corre#ation coefficient is to ,1.33, the worse the predictive abi#ity
of the independent variab#e for the dependent variab#e.
Answer: "a#se
Keywords: re&ression, coefficient, corre#ation, samp#e
113
21. The #ar&er the s#ope of the re&ression #ine, the more accurate the re&ression forecast.
Answer: "a#se
Difficulty: Easy
Keywords: re&ression, coefficient, s#ope
22. % #inear re&ression mode# resu#ts in the e1uation 9:1$,23;. <f the coefficient of determination is a
perfect 1.3, the corre#ation coefficient must be ,1.
Answer: True
Keywords: re&ression, coefficient, s#ope, corre#ation, determination
23. The standard error of the estimate measures how c#ose#y the data on the independent variab#e c#uster
around the re&ression #ine.
Answer: "a#se
Keywords: standard, error, re&ression
2. Time,series forecasts re1uire information about on#y the dependent variab#e.
Answer: True
Reference: Time,'eries (ethods
Keywords: time,series, method, time, dependent
2$. % na=ve forecast is a time,series method whereby the forecast for the ne5t period e1ua#s the demand
for the current period.
Answer: True
Keywords: na=ve, method
2). The advanta&e of the simp#e movin&,avera&e forecast is that it a##ows you to emphasi4e recent
demand over ear#ier demand.
Answer: "a#se
Keywords: simp#e, movin&, avera&e, forecast
2*. % simp#e movin& avera&e of one period wi## yie#d identica# resu#ts to a na=ve forecast.
Answer: True
Keywords: simp#e, movin&, avera&e, na=ve
114
2+. The e5ponentia# smoothin& method is a sophisticated, wei&hted, movin&,avera&e method.
Answer: True
Keywords: e5ponentia#, smoothin&, wei&hted, movin&, avera&e
2/. %n e5ponentia# smoothin& mode# with an a#pha e1ua# to 1.33 is the same as a na=ve forecastin&
mode#.
Answer: True
Keywords: e5ponentia#, smoothin&, a#pha, naive
33. >hen a trend is present, e5ponentia# smoothin& a#ways wi## be be#ow or above the actua# demand.
Answer: True
Keywords: e5ponentia#, smoothin&, trend
31. %n additive seasona# method is a forecastin& approach whereby seasona# forecasts are &enerated by
addin& the resu#ts of two or more forecastin& techni1ues to&ether to obtain a fina# forecast.
Answer: "a#se
Keywords: additive, seasona#, forecastin&
32. "orecasts a#ways contain errors.
Answer: True
Reference: 6hoosin& a Time,'eries (ethod
Keywords: forecast, error
33. "orecast error is simp#y the difference between the forecast and actua# demand.
Answer: True
Keywords: forecast, error, forecast, demand
3. % bias error resu#ts from unpredictab#e factors that cause the forecast to deviate from actua# demand.
Answer: "a#se
Keywords: bias, error
3$. 'ome ana#ysts prefer to use a ho#dout set as the fina# test of a forecastin& procedure.
Answer: True
Keywords: ho#dout, set, accuracy
115
3). 6ombination forecastin& is a method of forecastin& that se#ects the best from a &roup of forecasts
&enerated by simp#e techni1ues.
Answer: "a#se
Reference: .sin& (u#tip#e Techni1ues
Keywords: combination, forecast
3*. "ocus forecastin& se#ects the best forecast from a &roup of forecasts &enerated by individua#
techni1ues.
Answer: True
Keywords: focus, forecastin&
MULTIPLE C!ICE
3+. >hich one of the fo##owin& basic patterns of demand is difficu#t to predict because it is affected by
nationa# or internationa# events or because of a #ack of demand history ref#ectin& the sta&es of demand
from product deve#opment to dec#ine?
a. @ori4onta#
b. 'easona#
c. !andom
d. 6yc#ica#
Answer: d
Keywords: cyc#ica#, cyc#e, demand, pattern
3/. The e#ectricity bi## at Padco was driven so#e#y by the #i&hts throu&hout the officeA everythin& e#se was
driven by a#ternative ener&y sources. The office was open rou&h#y + hours a day, five days a week and
the c#eanin& crew spent about the same amount of time in the offices each week ni&ht. The ki#owatt
hour usa&e for the office was best described as a7
a. hori4onta# demand pattern.
b. random demand pattern.
c. seasona# demand pattern.
d. cyc#ica# demand pattern.
Answer: a
Difficulty: Easy
Keywords: hori4onta#, demand, pattern
11"
3. % re&ression e1uation with a coefficient of determination near one wou#d be most #ike#y to occur
when the data demonstrated a7
a. seasona# demand pattern.
b. trend demand pattern.
c. cyc#ica# demand pattern.
d. random demand pattern.
Answer: b
Difficulty: Easy
Keywords: trend, demand, pattern, coefficient, determination, re&ression
1. Professor >i##is noted that the popu#arity of his office hours mysterious#y rose in the midd#e and the
end of each semester, fa##in& off to virtua##y no visitors throu&hout the rest of the year. The demand
pattern at work is7
a. cyc#ica#.
b. random.
c. seasona#.
d. trend.
Answer: c
Difficulty: Easy
Keywords: seasona#, demand, pattern
2. There are historica##y three 32,month periods of &enera##y risin& prices in the stock market for every
one /,month period of fa##in& prices. This observation #eads you to conc#ude that the stock market
e5hibits a7
a. random pattern.
b. trend pattern
c. seasona# pattern.
d. cyc#ica# pattern.
Answer: d
Difficulty: Easy
Keywords: cyc#ica#, demand, pattern
3. Po##y Pro&nosticator was the &reatest 1uantitative forecaster in recorded history. % ski##fu# user of a##
techni1ues in your chapter on forecastin&, she knew better than to try and deve#op a forecast for data
that e5hibited a7
a. random pattern.
b. hori4onta# pattern.
c. seasona# pattern.
d. cyc#ica# pattern.
Answer: a
Difficulty: Easy
Keywords: random, demand, pattern
11#
. >hich one of the fo##owin& statements about the patterns of a demand series is "%8'E?
a. The five basic patterns of most business demand series are the hori4onta#, trend, seasona#, cyc#ica#,
and random patterns.
b. Estimatin& cyc#ica# movement is difficu#t. "orecasters do not know the duration of the cyc#e
because they cannot predict the events that cause it.
c. The trend, over an e5tended period of time, a#ways increases the avera&e #eve# of the series.
d. Every demand series has at #east two components7 hori4onta# and random.
Answer: c
Keywords: demand, pattern, trend
$. >hich one of the fo##owin& factors affectin& demand for &oods and services is an e5terna# factor?
a. Product desi&n
b. 6onsumer tastes
c. Price and advertisin& promotions
d. Packa&in& desi&n
Answer: b
Keywords: factor, consumer, demand, e5terna#
). >hich one of the fo##owin& factors affectin& demand for &oods and services is an interna# factor?
a. Back#o& po#icy
b. Cenera# state of the economy
c. 6ompetitor actions
d. 6onsumer tastes
Answer: a
Keywords: interna#, factor
*. One aspect of demand that makes every forecast inaccurate is7
a. trend variation.
b. random variation.
c. cyc#ica# variation.
d. seasona# variation.
Answer: b
Keywords: random, variation
11$
+. >hich one of the fo##owin& statements about forecastin& is "%8'E?
a. To achieve the ob2ective of deve#opin& a usefu# forecast from the information at hand, the
forecaster must se#ect the appropriate techni1ue. This choice sometimes invo#ves a trade,off
between forecast accuracy and cost.
b. Three &enera# types of forecastin& techni1ues are used for demand forecastin&7 time,series ana#ysis,
causa# methods, and 2ud&ment methods.
c. Time series e5press the re#ationship between the factor to be forecast and re#ated factors such as
promotiona# campai&ns, economic conditions, and competitor actions.
d. % time series is a #ist of repeated observations of a phenomenon, such as demand, arran&ed in the
order in which they actua##y occurred.
Answer: c
Keywords: time, series, factor, causa#
/. >hen forecastin& tota# demand for a## their services or products, few companies err by more than7
a. one percent.
b. ten percent.
c. five percent.
d. twenty percent.
Answer: c
Keywords: a&&re&ation, accuracy, forecast
$3. >hich one of the fo##owin& statements about forecastin& is T!.E?
a. The five basic patterns of demand are the hori4onta#, trend, seasona#, cyc#ica#, and the sub2ective
2ud&ment of forecasters.
b. 0ud&ment methods are desi&ned particu#ar#y for situations in which historica# data are #ackin&.
c. 6asua# methods are used when historica# data are avai#ab#e and the re#ationship between the factor
to be forecast and other e5terna# and interna# factors cannot be identified.
d. "ocused forecastin& is a techni1ue that focuses on one particu#ar component of demand and
deve#ops a forecast from it.
Answer: b
Reference: (u#tip#e sections
Keywords: 2ud&ment, data, forecast
$1. >hich one of the fo##owin& statements about forecastin& is T!.E?
a. Determinin& turnin& points, which are periods when the &rowth rate of demand wi## chan&e, can
best be accomp#ished with time,series methods.
b. <n the short,term Dhere, one to three months in the futureE, mana&ers are typica##y interested in
forecasts of tota# sa#es and &roups or fami#ies of products.
c. 6ausa# mode#s are the methods most often used for short,term forecastin&.
d. "or time hori4ons e5ceedin& two years, forecasts are usua##y deve#oped for tota# sa#es demand in
do##ars or some other common unit of measurement such as barre#s, pounds, or ki#owatts.
Answer: d
Keywords: forecast, time, series, hori4on, future, units
11%
$2. % short term forecast Dup to 3 monthsE wou#d most probab#y use7
a. tota# sa#es do##ars to describe the output.
b. a&&re&ated &roups of services or products as the output.
c. individua# services or products as the outputs.
d. sa#es do##ars for each product or &roup as the output.
Answer: c
Keywords: forecast, hori4on
$3. 8on& term is the correct time hori4on for which of the fo##owin& decisions?
a. (aster production p#annin&.
b. 'taff p#annin&
c. <nventory mana&ement
d. "aci#ity #ocation
Answer: d
Keywords: forecast, hori4on, #on&, term, faci#ity, #ocation
$. 'hort term is the correct time hori4on for which of the fo##owin& decisions?
a. (aster production p#annin&.
b. 6apacity p#annin&
c. Process mana&ement
Answer: a
Keywords: forecast, hori4on, short, term, master, production
$$. (edium term D3 months to 2 yearsE is the correct time hori4on for which of the fo##owin& decisions?
a. >orkforce schedu#in&.
b. 6apacity p#annin&
c. 'taff p#annin&
Answer: c
Keywords: forecast, hori4on, medium, staff
$). % forecastin& system that brin&s the manufacturer and its customers to&ether to provide input for
forecastin& is aDnE7
a. nested system.
b. harmonica##y ba#anced supp#y chain.
c. iterative De#phi method system for the va#ue chain.
d. co##aborative p#annin&, forecastin&, and rep#enishment system.
Answer: d
Keywords: forecast, hori4on
12&
$*. .sin& sa#esforce estimates for forecastin& has the advanta&e that7
a. no biases e5ist in the forecasts.
b. statistica# estimates of seasona# factors are more precise than any other approach.
c. forecasts of individua# sa#es force members can be easi#y combined to &et re&iona# or nationa# sa#es
tota#s.
d. confusion between customer FwantsG Dwish #istE and customer FneedsG Dnecessary purchasesE is
e#iminated.
Answer: c
Keywords: forecast, a&&re&ate
$+. % sa#esforce estimate may be used to forecast future demand when data are unavai#ab#e. This
techni1ue suffers when7
a. a sa#esman is unab#e to distin&uish between customer wants and needs.
b. the sa#es force estimates are for intermediate time hori4ons.
c. the sa#es force estimates are a&&re&ated to make an overa## estimate for demand.
d. the sa#es territories are broken down into re&ion or by product.
Answer: a
Difficulty: Easy
Keywords: sa#esforce, estimate
$/. >hich one of the fo##owin& is an e5amp#e of a time,series forecastin& techni1ue?
a. 'urvey ana#ysis
b. De#phi method
c. Trend,ad2usted e5ponentia# smoothin&
d. (arket research
Answer: c
Keywords: time, series, trend, e5ponentia#, smoothin&
)3. The 2ud&ment methods of forecastin& are to be used for purposes of7
a. makin& ad2ustments to 1uantitative forecasts due to unusua# circumstances.
b. forecastin& seasona# demands in #ieu of time,series approaches.
c. avoidin& the ca#cu#ations necessary for 1uantitative forecasts.
d. makin& forecasts more variab#e.
Answer: a
Keywords: 2ud&ment, ad2ustments, 1uantitative
121
)1. The De#phi method of forecastin& is usefu# when7
a. 2ud&ment and opinion are the on#y bases for makin& informed pro2ections.
b. a systematic approach to creatin& and testin& hypotheses is needed and the data are usua##y
&athered by sendin& a 1uestionnaire to consumers.
c. historica# data are avai#ab#e and the re#ationship between the factor to be forecast and other e5terna#
or interna# factors can be identified.
d. historica# data is avai#ab#e and the best basis for makin& pro2ections is to use past demand patterns.
Answer: a
Keywords: De#phi, 2ud&ment, opinion
)2. The manufacturer deve#oped and tested a 1uestionnaire, desi&ned to assist them in &au&in& the #eve#
of acceptance for their new product, and identified a representative samp#e as part of their7
a. sa#esforce estimate.
b. market research.
c. e5ecutive opinion.
d. De#phi method.
Answer: b
Difficulty: Easy
Keywords: market research, 2ud&ment
)3. <t wou#d be most appropriate to combine a 2ud&ment approach to forecastin& with a 1uantitative
approach by7
a. havin& a &roup of e5perts e5amine each historica# data point to determine whether it shou#d be
inc#uded in the mode#.
b. combinin& opinions about the 1uantitative mode#s to form one ubermode#.
c. ad2ustin& a forecast up or down to compensate for specific events not inc#uded in the 1uantitative
techni1ue.
d. deve#opin& a trend mode# to predict the outcomes of 2ud&menta# techni1ues in order to avoid the
cost of emp#oyin& the e5perts
Answer: c
Keywords: market research, 2ud&ment
). % #inear re&ression mode# is deve#oped that has a s#ope of H2.$ and an intercept of 13. The samp#e
coefficient of determination is 3.$3. >hich of the fo##owin& statements is T!.E?
a. The samp#e corre#ation coefficient must be 3.2$.
b. The samp#e corre#ation coefficient must be ,3.*1.
c. The samp#e corre#ation coefficient must be ,3.2$.
d. The samp#e corre#ation coefficient must be 3.*1.
Answer: b
Keywords: #inear, re&ression, samp#e corre#ation coefficient
122
)$. The number of I2 penci#s the bookstore se##s appears to be hi&h#y corre#ated with the number of
student credit hours each semester. The bookstore mana&er wants to create a #inear re&ression mode#
to assist her in p#acin& an appropriate order. <n this scenario7
a. the dependent variab#e is student credit hours.
b. there are two independent variab#es.
c. there are two dependent variab#es.
d. the independent variab#e is student credit hours.
Answer: d
Difficulty: Easy
)). >hich of the fo##owin& statements re&ardin& a samp#e corre#ation coefficient is T!.E?
a. The samp#e corre#ation coefficient is a#ways #ess than the coefficient of determination.
b. The samp#e corre#ation coefficient is a#ways #ess than the s#ope.
c. The samp#e corre#ation coefficient is a#ways #ess than or e1ua# to 1.
d. The samp#e corre#ation coefficient is a#ways between 3 and 1.
Answer: c
Difficulty: Easy
Tab#e 13.1
The %&ricu#tura# E5tension %&entJs Office has tracked ferti#i4er app#ication and crop
yie#ds for a variety of chickpea and has recorded the fo##owin& data as shown in the
fo##owin& tab#e. Their staff statistician deve#oped the re&ression mode# and computed
the performance statistics disp#ayed be#ow the data.
FertilizerBushels10481571202122529030195SUMMARY OUTPUTRegression
Statistics CoefficientsMultiple R0.671774612Intercept26.7645833R
Su!re0.45128113"ertili#er8.85273298A$%u&te$ R Su!re0.26837484St!n$!r$
'rr(r89.11239227O)&er*!ti(n&5
123
)*. .se the information provided in Tab#e 13.1. >hat percent in the variation of the variab#e Bushels is
e5p#ained by the va#ue of the variab#e Fertilizer?
a. )*K
b. $K
c. 2)K
d. +.+K
Answer: b
Keywords: re&ression, coefficient, determination, variance
)+. .se the information provided in Tab#e 13.1. "or every unit of ferti#i4er app#ied, the crop yie#d
increases by7
a. 2).* bushe#s.
b. +.+$ bushe#s.
c. +/.11 bushe#s.
d. $ bushe#s.
Answer: b
Keywords: re&ression, intercept
)/. .se the information provided in Tab#e 13.1. The va#ue of Bushels when Fertilizer is )3 is7
a. 1)1.
b. 22).
c. +*3.
d. $$+.
Answer: d
Keywords: re&ression, forecast
*3. .se the information provided in Tab#e 13.1. The va#ue of Fertilizer re1uired to &enerate 133 bushe#s
yie#d must be7
a. +.2+.
b. 3.3.
c. $.12.
d. 1.3*.
Answer: a
Keywords: re&ression, forecast
124
*1. .se the information provided in Tab#e 13.1. >e mi&ht e5pect that unferti#i4ed crops wou#d yie#d a
tota# of7
a. +/ bushe#s.
b. $2 bushe#s.
c. 2) bushe#s.
d. / bushe#s.
Answer: c
Keywords: re&ression, intercept
*2. .se the information in Tab#e 13.1. <f the corre#ation coefficient were ne&ative, what wou#d a#so be
true?
a. The coefficient of determination wou#d a#so be ne&ative.
b. %n increase in ferti#i4er wou#d resu#t in a decrease in crop yie#d.
c. %pp#yin& no ferti#i4er wou#d mean a ne&ative crop yie#d.
d. The standard error wou#d a#so be ne&ative.
Answer: b
Keywords: re&ression, s#ope, coefficient, corre#ation
*3. >hich one of the fo##owin& statements about forecastin& is "%8'E?
a. 9ou shou#d use the simp#e movin&,avera&e method to estimate the mean demand of a time series
that has a pronounced trend and seasona# inf#uences.
b. The wei&hted movin&,avera&e method a##ows forecasters to emphasi4e recent demand over ear#ier
demand. The forecast wi## be more responsive to chan&e in the under#yin& avera&e of the demand
series.
c. The most fre1uent#y used time,series forecastin& method is e5ponentia# smoothin& because of its
simp#icity and the sma## amount of data needed to support it.
d. <n e5ponentia# smoothin&, hi&her va#ues of a#pha p#ace &reater wei&ht on recent demands in
computin& the avera&e.
Answer: a
Keywords: forecastin&, movin&, avera&e, trend, seasona#
*. >hich of the fo##owin& statements re&ardin& time,series methods is "%8'E?
a. % na=ve forecast is identica# to a simp#e movin& avera&e of one period.
b. E5ponentia# smoothin& with an a#pha e1ua# to 1.33 is identica# to a na=ve forecast.
c. % wei&hted movin& avera&e with wei&hts of 3.$ and 3.$ is identica# to a simp#e movin& avera&e of
two periods.
d. % simp#e movin& avera&e of three periods is identica# to e5ponentia# smoothin& with an a#pha e1ua#
to 3.33.
Answer: d
Difficulty: @ard
Keywords: time, series, e5ponentia#, avera&e, na=ve, smoothin&
125
*$. >hen the under#yin& mean of a time series is very stab#e and there are no trend, cyc#ica#, or seasona#
inf#uences7
a. a simp#e movin&,avera&e forecast with n : 23 shou#d outperform a simp#e movin&,avera&e forecast
with n : 3.
b. a simp#e movin&,avera&e forecast with n : 3 shou#d outperform a simp#e movin&,avera&e forecast
with n : 23.
c. a simp#e movin&,avera&e forecast with n : 23 shou#d perform about the same as a simp#e movin&,
avera&e forecast with n : 3.
d. an e5ponentia# smoothin& forecast with a : 3.33 shou#d outperform a simp#e movin&,avera&e
forecast with L : 3.31.
Answer: a
Keywords: time, series, movin&, avera&e, stab#e
*). >ith the trend,ad2usted e5ponentia# smoothin& method7
a. the forecast for the ne5t period is simp#y the avera&e computed this period.
b. an estimate of the trend is computed by takin& the difference between the demand this period and
the demand #ast period to avoid #en&thy avera&in& ca#cu#ations.
c. the on#y smoothin& is done on the trend estimates usin& e5ponentia# smoothin&.
d. the forecast can be ad2usted to account for chan&es in the trend.
Answer: d
Keywords: trend, ad2usted, e5ponentia#
**. >ith the mu#tip#icative seasona# method of forecastin&7
a. the times series cannot e5hibit a trend.
b. seasona# factors are mu#tip#ied by an estimate of avera&e demand to arrive at a seasona# forecast.
c. the seasona# amp#itude is a constant, re&ard#ess of the ma&nitude of avera&e demand.
d. there can be on#y four seasons in the time,series data.
Answer: b
Keywords: mu#tip#icative, seasona#
*+. >hich one of the fo##owin& statements about forecastin& is "%8'E?
a. The method for incorporatin& a trend into an e5ponentia##y smoothed forecast re1uires the
estimation of three smoothin& constants7 one for the mean, one for the trend, and one for the
error.
b. The cumu#ative sum of forecast errors D6"EE is usefu# in measurin& the bias in a forecast.
c. The standard deviation and the mean abso#ute deviation measure the dispersion of forecast errors.
d. % trackin& si&na# is a measure that indicates whether a method of forecastin& has any bui#t,in
biases over a period of time.
Answer: a
Keywords: trend, e5ponentia#, smoothin&
12"
*/. >hich one of the fo##owin& is most usefu# for measurin& the bias in a forecast?
a. 6umu#ative sum of forecast errors
b. 'tandard deviation of forecast errors
c. (ean abso#ute deviation of forecast errors
d. Percenta&e forecast error in period t
Answer: a
Keywords: bias, cumu#ative, sum, error
+3. >hich one of the fo##owin& time,series forecastin& methods wi## &enerate the most accurate forecasts
when demands have a consistent trend pattern?
a. 'imp#e movin&,avera&e method
b. >ei&hted movin&,avera&e method
c. E5ponentia# smoothin& method
d. Trend,ad2usted e5ponentia# smoothin& method
Answer: d
Keywords: trend, ad2usted, e5ponentia#, smoothin&
+1. % trackin& si&na# &reater than 4ero and a mean abso#ute deviation &reater than 4ero imp#y that the
forecast has7
a. no bias and no variabi#ity of forecast error.
b. a non4ero amount of bias and a non4ero amount of forecast error variabi#ity.
c. no bias and a non4ero amount of forecast error variabi#ity.
d. a non4ero amount of bias and no variabi#ity of forecast error.
Answer: b
Difficulty: @ard
Keywords: trackin&, si&na#, error
+2. %ssume that a time,series forecast is &enerated for future demand and subse1uent#y it is observed that
the forecast method did not accurate#y predict the actua# demand. 'pecifica##y, the forecast errors
were found to be7
(ean abso#ute percent error : 13K
6umu#ative sum of forecast errors : 3K
>hich one of the statements concernin& this forecast is T!.E?
a. The forecast has no bias but has a positive standard deviation of errors.
b. The forecast has a positive bias and a standard deviation of errors e1ua# to 4ero.
c. The forecast has no bias and has a standard deviation of errors e1ua# to 4ero.
d. The forecast has a positive bias and a positive standard deviation of errors.
Answer: a
Keywords: bias, standard, deviation
12#
+3. >hich one of the fo##owin& statements is T!.E?
a. The idea# of 4ero bias and 4ero (%D can be accomp#ished by systematica##y searchin& for the best
va#ues of the smoothin& constants.
b. Bias is a#ways #ess than (%D.
c. "or pro2ections of more stab#e demand patterns without trends, seasona# inf#uences, or cyc#ica#
inf#uences, use #ar&er va#ues of n in the simp#e movin&,avera&e approach.
d. Cettin& a sin&#e forecast of $33 units for the month of 0u#y is better than &ettin& a forecast showin&
a /$ percent chance that demand for 0u#y wi## be between $3 and $$3 units.
Answer: c
Keywords: simp#e, movin&, avera&e, trend
+. >hich one of the fo##owin& is an e5amp#e of causa# forecastin& techni1ue?
a. >ei&hted movin& avera&e
b. 8inear re&ression
c. E5ponentia# smoothin&
d. De#phi method
Answer: b
Keywords: causa#, re&ression, #inear
+$. .se the information from Tab#e 13.2. .sin& a three,week movin& avera&e, what is the forecast for
week *?
a. $$
b. $)
c. $*
d. $+
Answer: c
Keywords: movin&, avera&e
12$
Tab#e 13.2
The mana&er of a pi44a shop must forecast week#y demand for specia# pi44as so that he can
order pi44a she##s week#y. !ecent demand has been7
+). .se the information from Tab#e 13.2. <f a na=ve forecast were constructed for week *, the va#ue
obtained wou#d be7
a. $3 pi44as.
b. $$ pi44as.
c. $) pi44as.
d. )3 pi44as.
Answer: d
Keywords: na=ve, forecast, time, series
+*. .se the information from Tab#e 13.2. <f a four,week wei&hted movin& avera&e were used, what wou#d
be the forecast for week *? DThe wei&hts are 3.)3, 3.33, 3.3*, and 3.33 with 3.)3 app#ied to the most
recent period and 3.33 app#ied to the o#dest period.E
a. $+ pi44as
b. )3 pi44as
c. )2 pi44as
d. ) pi44as
Answer: a
Keywords: wei&hted, movin&, avera&e, time
++. Demand for a new five,inch co#or TM durin& the #ast si5 periods has been as fo##ows7
>hat is the forecast for period * if the company uses the simp#e movin&,avera&e method with n : ?
a. "ewer than or e1ua# to 11$
b. Creater than 11$ but fewer than or e1ua# to 123
c. Creater than 123 but fewer than or e1ua# to 12$
d. Creater than 12$
Answer: c
Keywords: simp#e, movin&, avera&e
12%
+/. Demands for a new#y deve#oped sa#ad bar at the Creat Professiona# restaurant for the first si5 months
of this year are shown in the fo##owin& tab#e. >hat is the forecast for 0u#y if the 3,month wei&hted
movin&,avera&e method is used? D.se wei&hts of 3.$ for the most recent demand, 3.3, and 3.2 for the
o#dest demand.E

a. "ewer than or e1ua# to 32 units
b. Creater than 32 units but fewer than or e1ua# to 2 units
c. Creater than 2 units but fewer than or e1ua# to $2 units
d. Creater than $2
Answer: c
Keywords: wei&hted, movin&, avera&e
/3. <t is now near the end of (ay and you must prepare a forecast for 0une for a certain product. The
forecast for (ay was /33 units. The actua# demand for (ay was 1333 units. 9ou are usin& the
e5ponentia# smoothin& method with : 3.23. The forecast for 0une is7
a. fewer than /2$ units.
b. &reater than or e1ua# to /2$ units but fewer than /$3 units.
c. &reater than or e1ua# to /$3 units but fewer than 1333 units.
d. &reater than or e1ua# to 1333 units.
Answer: a
Keywords: e5ponentia#, smoothin&
13&
/1. The owner of the 6rossed 6onnections e#ectronic app#iance repair shop is en2oyin& increasin&
demand for her services. Tota# week#y demand, measured in standard #abor hours, has been
increasin&. The owner uses trend,ad2usted e5ponentia# smoothin& to make forecasts for the fo##owin&
week so that she can p#an work schedu#es and staffin& #eve#s. 'he has the fo##owin& data to prepare
her forecast7
A
tH1
: 133 hours : 3.33
T
tH1
: 13 hours : 3.13
D
t
: 123 hours
%ssumin& she is now at the end of week t, what is the forecast for week t N 1?
a. "ewer than or e1ua# to 11 hours
b. Creater than 11 hours but fewer than or e1ua# to 11+ hours
c. Creater than 11+ hours but fewer than or e1ua# to 122 hours
d. Creater than 122 hours
Answer: d
/2. The %cme 6omputer 6ompany has recorded sa#es of one of its products for a si5,week period7
.sin& the three,week movin&,avera&e method, forecast sa#es for week *.
a. 23
b. 21
c. 22
d. 23
Answer: d
131
/3. .se the information in Tab#e 13.3. 6ompute a three,week movin&,avera&e forecast for the arriva# of
medica# c#inic patients in week $.
a. "ewer than or e1ua# to 3+2
b. Creater than 3+2 but fewer than or e1ua# to 3+/
c. Creater than 3+/ but fewer than or e1ua# to 3/)
d. Creater than 3/)
Answer: c
/. .se the information in Tab#e 13.3. <f the actua# number of patients is 1$ in week $, what is the
forecast for week ), usin& a three,week movin&,avera&e forecast?
a. "ewer than or e1ua# to 3/3
b. Creater than 3/3 but fewer than or e1ua# to 3/+
c. Creater than 3/+ but fewer than or e1ua# to 3)
d. Creater than 3)
Answer: c
/$. .se the information in Tab#e 13.3. 6a#cu#ate the e5ponentia# smoothin& forecast for week $ usin& :
3.13 and F
: 13.
a. "ewer than or e1ua# to 33
b. Creater than 33 but fewer than or e1ua# to 3+
c. Creater than 3+ but fewer than or e1ua# to 1)
d. Creater than 1)
Answer: b
132
Tab#e 13.3
/). .se the information in Tab#e 13.. .se the three,month movin&,avera&e method to forecast sa#es for
0une.
b. Creater than 23 but fewer than or e1ua# to 22 units
c. Creater than 22 but fewer than or e1ua# to 2 units
d. Creater than 2 units
Answer: d
/*. .se the information in Tab#e 13.. 'uppose actua# sa#es in 0une turn out to be 3 units. .se the three,
month movin&,avera&e method to forecast the sa#es in 0u#y.
a. "ewer than or e1ua# to 2*
b. Creater than 2* but fewer than or e1ua# to 2/ units
c. Creater than 2/ but fewer than or e1ua# to 31 units
d. Creater than 31 units
Answer: c
/+. .se the information in Tab#e 13.. >hat is the forecast for 0u#y with the two,month movin&,avera&e
method and 0une sa#es of 3 units?
a. "ewer than or e1ua# to 2$ units
b. Creater than 2$ but fewer than or e1ua# to 33 units
c. Creater than 33 but fewer than or e1ua# to 3$ units
d. Creater than 3$ units
Answer: c
133
Tab#e 13.
//. .se the information in Tab#e 13.. The forecastin& e1uation for a three,month wei&hted movin&
avera&e is7
F
t
: W
1
D
t
N W
2
D
tH1
N W
3
D
tH2

<f the sa#es for 0une were 3 units and the wei&hts are W
1
: 1O2, W
2
: 1O3, and W
3
: 1O), what is
the forecast for 0u#y?
b. Creater than 33 but fewer than or e1ua# to 33 units
c. Creater than 33 but fewer than or e1ua# to 3) units
d. Creater than 3) units
Answer: b
133. .se the information in Tab#e 13.$. .sin& the simp#e movin&,avera&e techni1ue for the most
recent three months, what wi## be the forecasted demand for Povember?
a. "ewer than or e1ua# to 2)3 units
b. Creater than 2)3, but fewer than or e1ua# to 2*$ units
c. Creater than 2*$, but fewer than or e1ua# to 2/3 units
d. (ore than 2/3 units
Answer: c
Keywords: simp#e, movin&, avera&e
134
Tab#e 13.$
131. .se the information in Tab#e 13.$. .sin& the ,month wei&hted movin&,avera&e techni1ue and
the fo##owin& wei&hts, what is the forecasted demand for Povember?
Ti+e Peri($ ,ei-.t
(ost recent month $3K
One month a&o 23K
Two months a&o 23K
Three months a&o 13K
a. "ewer than or e1ua# to 2$3 units
b. Creater than 2$3 but fewer than or e1ua# to 2)$ units
c. Creater than 2)$ but fewer than or e1ua# to 2+3 units
d. (ore than 2+3 units
Answer: c
132. .se the information in Tab#e 13.$. .sin& the e5ponentia# smoothin& method, with a#pha e1ua# to
3.2, what is the forecasted demand for Povember? .se an initia# va#ue for the forecast e1ua# to 2**
units.
a. "ewer than or e1ua# to 2)3 units
b. Creater than 2)3 but fewer than or e1ua# to 2*$ units
c. Creater than 2*$ but fewer than or e1ua# to 2+$ units
d. (ore than 2+$ units
Answer: b
135
Tab#e 13.)
133. .se the information in Tab#e 13.). .se an e5ponentia# smoothin& mode# with a smoothin&
parameter of 3.33 and an %pri# forecast of $2$ to determine what the forecast sa#es wou#d have been
for 0une.
a. "ewer than or e1ua# to $3$
b. Creater than $3$ but fewer than or e1ua# to $$
c. Creater than $$ but fewer than or e1ua# to $$$
d. Creater than $$$
Answer: c
Difficulty: @ard
13. .se the information in Tab#e 13.). .se the e5ponentia# smoothin& method with : 3.$ and a
"ebruary forecast of $33 to forecast the sa#es for (ay.
a. "ewer than or e1ua# to $33
b. Creater than $33 but fewer than or e1ua# to $3
c. Creater than $3 but fewer than or e1ua# to $$3
d. Creater than $$3
Answer: b
13$. .se the information in Tab#e 13.*. The forecast for month 2 is7
a. fewer than or e1ua# to 123 units.
b. &reater than 123 but fewer than or e1ua# to 13 units.
c. &reater than 13 but fewer than or e1ua# to 1)3 units.
d. &reater than 1)3 units.
Answer: c
13"
Tab#e 13.*
TO(BO> is a sma## manufacturer of penci#s and has had the fo##owin& sa#es record for the
most recent five months7
.se an e5ponentia# smoothin& mode# to forecast sa#es in months 2, 3, , and $. 8et the
smoothin& parameter e1ua# 3.)A se#ect "
1
: 1$3 to &et the forecast started.
13). .se the information in Tab#e 13.*. The forecast for month 3 is7
b. &reater than 13 but fewer than or e1ua# to 1)3 units.
c. &reater than 1)3 but fewer than or e1ua# to 1+3 units.
d. &reater than 1+3 units.
Answer: b
13*. .se the information in Tab#e 13.*. The forecast for month is7
b. &reater than 13 but fewer than or e1ua# to 1$3.
c. &reater than 1$3 but fewer than or e1ua# to 1)3 units.
d. &reater than 1)3 units.
Answer: c
Reference: Time,'eries (ethod
13+. .se the information in Tab#e 13.*. The forecast for month $ is7
a. fewer than or e1ua# to 1$3 units.
b. &reater than 1$3 but fewer than or e1ua# to 1)3 units.
c. &reater than 1)3 but fewer than or e1ua# to 1*3 units.
d. &reater than 1*3 units.
Answer: c
13/. .se the information in Tab#e 13.*. The cumu#ative sum of errors 6"E from months 2 throu&h $
is7
a. fewer than or e1ua# to +3.
b. &reater than +3 but fewer than or e1ua# to +$.
c. &reater than +* but fewer than or e1ua# to /3.
d. &reater than /3.
Answer: b
Keywords: 6"E, cumu#ative, sum, error
113. .se the information in Tab#e 13.*. >hat is the (%D for months 2 throu&h $?
a. 8ess than or e1ua# to 23
b. Creater than 23 but #ess than or e1ua# to 2$
c. Creater than 2$ but #ess than or e1ua# to 33
d. Creater than 33
Answer: b
Keywords: (%D, mean, abso#ute, deviation
13#
111. The 6#assica# 6onsu#tant 6ompany provides forecastin& research for c#ients such as a &roup of
five doctors associated with a new hospita# hea#th,maintenance pro&ram. The company has been
asked to forecast the number of patients re1uestin& b#ood ana#ysis per week. The past week#y avera&e
is 3+ and, for the trend, is 2 per week. This weekJs demand was 2 b#ood tests. @ow many patients
wi## come ne5t week? D'uppose : 3.13 and : 3.33.E
a. "ewer than or e1ua# to 3/
b. Creater than 3/ but fewer than or e1ua# to 1
c. Creater than 1 but fewer than or e1ua# to 3
d. Creater than 3
Answer: c
Keywords: trend, e5ponentia#, smoothin&
112. .se the information in Tab#e 13.+. "orecast the month#y sa#es of the machine for month /, usin&
the three,month movin&,avera&e method.
a. Q3,*2+
b. Q,3+$
c. Q3,++3
d. Q3,2**
Answer: c
Reference: Time,'eries (ethod
Keywords: time, series, movin&, avera&e
113. .se the information in Tab#e 13.+. .se the 3,month wei&hted movin&,avera&e method to
ca#cu#ate the forecast for month /. The wei&hts are 3.)3, 3.33, and 3.13, where 3.)3 refers to the most
recent demand.
a. Q3,/1)
b. Q3,++3
c. Q3,3/)
d. Q3,22/
Answer: a
13$
Tab#e 13.+
% sa#es mana&er wants to forecast month#y sa#es of the machines the company makes usin& the
fo##owin& month#y sa#es data.
Month Balance
1 /30803
2 /20558
3 /30469
4 /30442
5 /20682
6 /30469
7 /40442
8 /30728
11. .se the information in Tab#e 13.+. <f the forecast for period * is Q,333, what is the forecast for
period / usin& e5ponentia# smoothin& with an a#pha e1ua# to 3.33?
a. Q,333
b. Q,32
c. Q,1$+
d. Q3,/$*
Answer: c
Difficulty: @ard
11$. .se the information in Tab#e 13.+. 6a#cu#ate the forecast for period / usin& a na=ve forecast.
a. Q3,*2+
b. Q3,+33
c. Q,2
d. Q,3+$
Answer: a
Difficulty: Easy
Keywords: na=ve, forecast, time, series
Tab#e 13./
The mana&ement of an insurance company monitors the number of mistakes made by
te#ephone service representatives for a company they have subcontracted with. The number
of mistakes for the past severa# months appears in this tab#e a#on& with forecasts for errors
made with three different forecastin& techni1ues. The co#umn #abe#ed E5ponentia# was
created usin& e5ponentia# smoothin& with an a#pha of 3.33. The co#umn #abe#ed (% is
forecast usin& a movin& avera&e of three periods. The co#umn #abe#ed >(% uses a 3,month
wei&hted movin& avera&e with wei&hts of 3.)$, 3.2$, and 3.13 for the most,to,#east recent
months.
MonthMistakesExponentialMAWMA155 261 371 47771626758873707461007779847
10984889581229299105912610111011710126108119123
13%
11). .sin& Tab#e 13./, what is the 6"E for months ),13 for the e5ponentia# smoothin& techni1ue?
a. 8ess than or e1ua# to 123
b. Creater than 123 but #ess than or e1ua# to 123
c. Creater than 123 but #ess than or e1ua# to 12)
d. Creater than 12)
Answer: b
Keywords: 6"E, forecast, error
11*. .sin& Tab#e 13./, what is the ('E for months ),13 for the e5ponentia# smoothin& techni1ue?
a. 8ess than $/1
b. Creater than or e1ua# to $/1 but #ess than $/$
c. Creater than or e1ua# to $/$ but #ess than $//
d. Creater than $//
Answer: d
Keywords: ('E, forecast, error
11+. .sin& Tab#e 13./, what is the (%D for months ),13 for the e5ponentia# smoothin& techni1ue?
a. 8ess than 23
b. Creater than or e1ua# to 23 but #ess than 2$
c. Creater than or e1ua# to 2$ but #ess than 2*
d. Creater than or e1ua# to 2*
Answer: b
Keywords: (%D, forecast, error, mean, abso#ute
11/. .sin& Tab#e 13./, what is the order of the forecastin& techni1ues from most accurate to #east
accurate based on their errors for months ),13?
a. E5ponentia# smoothin&, wei&hted movin& avera&e, movin& avera&e
b. E5ponentia# smoothin&, movin& avera&e, wei&hted movin& avera&e
c. (ovin& avera&e, e5ponentia# smoothin&, wei&hted movin& avera&e
d. >ei&hted movin& avera&e, movin& avera&e, e5ponentia# smoothin&
Answer: d
14&
123. .sin& Tab#e 13./, what is the mean abso#ute percent error for months ),13 usin& the e5ponentia#
smoothin& forecasts?
a. 8ess than 22K
b. Creater than or e1ua# to 22K but #ess than 2K
c. Creater than or e1ua# to 2K but #ess than 2)K
d. Creater than 2)K
Answer: a
Keywords: (%PE, mean, abso#ute, percent, error
121. .sin& Tab#e 13./, what is the trackin& si&na# for months ),13 usin& the e5ponentia# smoothin&
forecasts?
a. 3.$
b. H3.$
c. $.3
d. H$.3
Answer: c
Keywords: trackin&, si&na#, error
122. 6onsider the fo##owin& data concernin& the performance of a forecastin& method.

a. The 6"E is &reater than 133, and the (%D is #ess than $3.
b. The 6"E is #ess than 133, and the (%D is #ess than $3.
c. The 6"E is #ess than 133, and the (%D is &reater than $3.
d. The 6"E is &reater than 133, and the (%D is &reater than $3.
Answer: b
Keywords: 6"E, (%D, cumu#ative, forecast, error, abso#ute, deviation, mean
141
123. >hich statement about forecast accuracy is T!.E?
a. % mana&er must be carefu# not to FoverfitG past data.
b. The u#timate test of forecastin& power is how we## a mode# fits past data.
c. The u#timate test of forecastin& power is how a mode# fits ho#dout samp#es.
d. The best techni1ue in e5p#ainin& past data is the best techni1ue to predict the future.
Answer: a
Keywords: forecast, accuracy
12. % forecaster that uses a ho#dout,set approach as a fina# test for forecast accuracy typica##y7
a. uses the entire data set avai#ab#e to deve#op the forecast.
b. uses the o#der observations in the data set to deve#op the forecast and more recent to check
accuracy.
c. uses the newer observations in the data set to deve#op the forecast and o#der observations to check
accuracy.
d. uses every other observation to deve#op the forecast and the remainin& observations to check the
accuracy.
Answer: b
Keywords: ho#dout, set, accuracy
12$. Barney took what he #iked to ca## Fthe shot&un approachG to forecastin&. Every period he tried a
number of different forecastin& approaches and at the end of the period he reviewed a## of the
forecasts to see which was the most accurate. The winner wou#d be used for ne5t periodJs forecast
Dbut he sti## made forecasts a## possib#e ways so he cou#d use the system a&ain for the fo##owin&
periodE. The more forma# name for this techni1ue is7
a. combination forecastin&.
b. post,hoc forecastin&.
c. focus forecastin&.
d. shot&un forecastin&. @e is usin& the correct termino#o&y.
Answer: c
12). %ndy took what he #iked to ca## Fthe sheriff without a &unG approach to forecastin&. Every period he
tried a number of different forecastin& approaches and simp#y avera&ed the predictions for a## of the
techni1ues. This overa## avera&e was the officia# forecast for the period. The more forma# name for
this techni1ue is7
a. &rand avera&in&.
b. focus forecastin&.
c. simp#e avera&e.
d. combination forecastin&.
Answer: d
Keywords: combination, forecastin&
142
12*. The input database to a forecastin& process is typica##y se&mented into7
a. parent and chi#d data
b. hierarchica# and re#ative data.
c. independent and dependent data.
d. base and nonbase data..
Answer: d
Reference: Puttin& <t %## To&ether7 "orecastin& as a Process
Keywords: database, base, nonbase, data
12+. The #oca# bui#din& supp#y store e5perienced what they considered to be irre&u#ar demands for #umber
after the devastatin& hurricane season. These unusua# data points were considered7
a. nonbase data.
b. out#iers.
c. residua#s.
d. erroneous.
Answer: a
Keywords: database, base, nonbase, data
12/. >hich word best describes forecastin& ?
a. Ruantitative
b. Process
c. !esource
d. (ana&eria#
Answer: b
Keywords: process, forecast
FILL I' TE (LA')
133. SSSSSSSSSSSS is the prediction of future events used for p#annin& purposes.
Answer: "orecastin&
Reference: <ntroduction
Difficulty: Easy
Keywords: forecast, predict
131. SSSSSSSSSSSS is the act of c#usterin& severa# simi#ar products or services so that companies can
obtain more accurate forecasts.
Answer: %&&re&ation
Keywords: a&&re&ation, c#usterin&, forecast, accuracy
143
132. SSSSSSSSSSSS methods of forecastin& trans#ate the opinions of mana&ement, e5perts, consumers, or
sa#esforce into 1uantitative estimates.
Answer: 0ud&ment
Keywords: 2ud&ment, method, forecast
133. SSSSSSSSSSSS methods use historica# data on independent variab#es to predict demand.
Answer: 6ausa#
Keywords: causa#, method, forecastin&
13. SSSSSSSSSSSS ana#ysis is a statistica# approach that re#ies heavi#y on historica# demand data to
pro2ect the future si4e of demand, and it reco&ni4es trends and seasona# patterns.
Answer: Time,series
Keywords: time, series, time,series
13$. The SSSSSSSSSSSS is a process of &ainin& consensus from a &roup of e5perts whi#e maintainin&
their anonymity.
Answer: De#phi method
Keywords: De#phi, 2ud&ment, method
13). SSSSSSSSSSSS is a systematic approach to determine consumer interest in a product or service by
creatin& and testin& hypotheses throu&h data,&atherin& surveys.
Answer: (arket research
Difficulty: Easy
Keywords: market, research, 2ud&ment
13*. SSSSSSSSSSSS is a causa# method of forecastin& in which one variab#e is re#ated to one or more
variab#es by a #inear e1uation.
Answer: 8inear re&ression
Keywords: #inear, re&ression, causa#
13+. The SSSSSSSSSSSS variab#e is the variab#e that one wants to forecast.
Answer: dependent
Keywords: dependent, variab#e
144
13/. SSSSSSSSSSSS are assumed to FcauseG the resu#ts that a forecaster wishes to predict.
Answer: <ndependent variab#es
Keywords: independent, variab#e, cause
13. %DnE SSSSSSSSSSSS measures the direction and stren&th between the independent variab#e and the
dependent variab#e.
Answer: samp#e corre#ation coefficient, r
Keywords: samp#e, corre#ation, coefficient, r, independent, dependent, variab#e
11. The SSSSSSSSSSSS measures the amount of variation in the dependent variab#e about its mean that is
e5p#ained by the re&ression #ine.
Answer: samp#e coefficient of determination, r,s1uared
Keywords: samp#e, coefficient, determination, r,s1uared
12. %DnE SSSSSSSSSSSS forecast is a time,series method whereby the forecast for the ne5t period e1ua#s
the demand for the current period.
Answer: na=ve
Keywords: na=ve, forecast, method
13. SSSSSSSSSSSS is a time,series method used to estimate the avera&e of a demand time series by
avera&in& the demand for the n most recent time periods.
Answer: 'imp#e movin& avera&e
Keywords: simp#e, movin&, avera&e, time
1. SSSSSSSSSSSS is a method for incorporatin& a trend in an e5ponentia##y smoothed forecast.
Answer: Trend,ad2usted e5ponentia# smoothin&
1$. SSSSSSSSSSSS is the difference found by subtractin& the forecast from actua# demand for a &iven
period.
Answer: "orecast error
145
1). The dispersion of forecast errors is measured by both (%D and ('E, which behave different#y in
the way they emphasi4e errors. SSSSSSSSSSSS &ives #ar&er wei&ht to errors and SSSSSSSSSSSS &ives
sma##er wei&ht to errors.
Answer: ('E, (%D
Difficulty: Easy
Keywords: forecast, error, (%D, ('E, mean, abso#ute, deviation, s1uared
1*. SSSSSSSSSSSS are often the resu#t of ne&#ectin& or not accurate#y estimatin& patterns of demand
such as a trend, seasona#, or cyc#ica# pattern.
Answer: Bias errors
Keywords: bias, error
1+. %DnE SSSSSSSSSSSS is a measure that indicates whether a method of forecastin& is accurate#y
predictin& actua# chan&es in demand.
Answer: trackin& si&na#
Keywords: trackin&, si&na#, measure
1/. %DnE SSSSSSSSSSSS is a portion of data from more recent time periods that is used to test different
mode#s deve#oped from ear#ier time period data.
Answer: ho#dout set
Keywords: ho#dout, set, data
1$3. SSSSSSSSSSSS are produced by avera&in& independent forecasts based on different methods or
different data, or both.
Answer: 6ombination forecasts
Keywords: combination, forecast
1$1. SSSSSSSSSSSS se#ects the best forecast from a &roup of forecasts &enerated by individua#
techni1ues.
Answer: "ocus forecastin&
1$2. % history fi#e of past demand wi## often be separated into two partsA the SSSSSSSSSSSS part wi##
ref#ect irre&u#ar demands.
Answer: nonbase DdataE
Reference: Puttin& it %## To&ether7 "orecastin& as a Process
Keywords: forecastin&, process, nonbase, data, history
14"
1$3. "orecastin& is aDnE SSSSSSSSSSSS that shou#d continua##y be reviewed for improvements.
Answer: DnestedE process
Reference: Puttin& it %## To&ether7 "orecastin& as a Process
Keywords: forecastin&, process
S!RT A'S*ERS
1$. Discuss the combination of forecasts used by .ni#ever. <f they were forced to use on#y one
techni1ue, which wou#d be the most accurate and why?
Answer: .ni#ever uses a 6DP system deve#oped by (anu&istics to perform times,series Dand
possib#y causa#,mode#E forecastin&. These forecasts are then modified by 2ud&ment
techni1ues, inc#udin& sa#esforce estimates. %nswers wi## vary re&ardin& a sin&#e best
techni1ue, but students may be drawn toward a causa# mode# with predictors for a time
e#ement, advertisin& e5penditures and form of media, and other e#ements.
Reference: <ntroduction
Keywords: time, series, causa#, 2ud&ment
1$$. >hy are forecasts for product fami#ies typica##y more accurate than forecasts for the individua# items
within a product fami#y?
Answer: (ore accurate forecasts are obtained for a &roup of items because the individua#
forecast errors for each item tend to cance# each other.
Keywords: a&&re&ate, forecast, accuracy
1$). >hich forecastin& approaches wou#d you entertain for #on&,term forecasts?
Answer: 8on&,term forecastin& typica##y uses causa# or 2ud&ment forecastin& methods.
Keywords: #on&, term, forecast
1$*. >hich forecastin& techni1ue wou#d you consider for techno#o&ica# forecasts?
Answer: < wou#d consider the De#phi method because techno#o&ica# chan&e takes p#ace at a rapid
pace and often the on#y way to make forecasts is to &et the opinion of e5perts who devote
their attention to those issues.
Keywords: techno#o&ica#, De#phi, forecast
14#
1$+. Pho Bu#ous, a Mietnamese restaurant in the bust#in& metropo#is of Edmond, has had &reat success
usin& forecastin& techni1ues to predict demand for their main menu items ever since they opened
their doors. Their forecast for #ast month was &ross#y inaccurate and so far this month, their forecast
appears to be 2ust as bad as #ast monthJs. <tJs a#ready time to prepare the forecast for ne5t month, what
shou#d they do about their mode#?
Answer: The answer depends on whether Pho Bu#ous be#ieves that #ast monthJs and this monthJs
resu#ts are aberrations or the start of somethin& new. Both causa# and time series techni1ues
assume that there has been no chan&e in how the wor#d works, that is, independent factors of
time or other variab#es wi## permit the forecaster to make accurate predictions about the
future. <f Pho Bu#ous be#ieves that there is a si&nificant chan&e in the system, for e5amp#e, a
new competitor in the Edmond restaurant scene, a si&nificant chan&e in popu#ation or in their
disposab#e income, then they mi&ht try mu#tip#e re&ression to inc#ude these factors or wei&ht
more recent data more heavi#y in a time,series mode# Dthe scenario isnJt specific about which
techni1ue they have used thus farE. Pho Bu#ous mi&ht a#so try a combination approach if they
fee# their situation has chan&ed si&nificant#y. On the other hand, if Pho Bu#ous fee#s that these
two months are not ref#ective of any ma2or paradi&m shift for the restaurant crowd in
Edmond, they cou#d continue to use the mode#DsE they have had success with in the past.
Reference: (u#tip#e 'ections
Keywords: forecast, accuracy
1$/. E5p#ain how the va#ue of a#pha affects forecasts produced by e5ponentia# smoothin&.
Answer: The smoothin& constant a#pha a##ows recent demand va#ues to be emphasi4ed or
deemphasi4ed dependin& on how the forecaster wishes to incorporate previous va#ues. 8ar&er
va#ues emphasi4e recent #eve#s of demand and resu#t in forecasts more responsive to chan&es
in the under#yin& avera&e. 'ma##er a#pha va#ues treat past demand more uniform#y and resu#t
in more stab#e forecasts.
Keywords: a#pha, e5ponentia#, smoothin&
1)3. >hat is the difference between mean abso#ute deviation D(%DE and mean s1uared error D('EE?
Answer: Both (%D and ('E are measurements of the amount of forecast error, and sma##er
va#ues of both metrics ref#ect superior forecastin& methods. The difference between the two is
that (%D p#aces #ess emphasis on an out#ier whi#e ('E is more sensitive to one. % forecast
techni1ue that seeks to minimi4e ('E wi## have overa## forecast accuracy hurt by one
e5treme out#ier more than a forecast deve#oped usin& a (%D,minimi4in& techni1ue.
Keywords: (%D, ('E, mean, abso#ute, deviation, s1uared, error
14$
1)1. @ow is a typica# forecastin& process simi#ar to the PD6% cyc#e?
Answer: The authors indicate that forecastin& is a process that shou#d be continua##y reviewed for
improvementsA the PD6% cyc#e provides one vehic#e for continuous improvement. The
authors present a si5 step cyc#e for forecastin&7 1E ad2ust the history fi#e, 2E prepare initia#
forecasts, 3E consensus meetin&s and co##aboration, E revise forecasts, $E review by the
operatin& committee, and )E fina#i4e and communicate the forecasts. The history fi#e
ad2ustment in step 1 provides a check of forecast accuracyA if resu#ts have been #ess than
ste##ar, then p#anners and forecasters wi## e5p#ore different techni1ues andOor independent
variab#es to prepare future forecasts. This approach c#ose#y para##e#s the PD6% cyc#e of
methodica##y tryin& a new approach and checkin& resu#ts before actin& system,wide.
Keywords: PD6%, forecastin&, process
PR!(LEMS
1)2. 6a#cu#ate three forecasts usin& the fo##owin& data. "irst, for periods throu&h 13, deve#op the
e5ponentia##y smoothed forecasts usin& a forecast for period 3 DF3E of $.3 and an a#pha of 3..
'econd, ca#cu#ate the three,period movin&,avera&e forecast for periods throu&h 13. Third, ca#cu#ate
the wei&hted movin& avera&e for periods throu&h 13, usin& wei&hts of .*3, .23, and .13, with 3.*3
app#ied to the most recent data. 6a#cu#ate the mean abso#ute deviation D(%DE and the cumu#ative
sum of forecast error D6"EE for each forecastin& procedure. >hich forecastin& procedure wou#d you
se#ect? >hy?
M(nt. 1e+!n$
1 $
2 +
3 3
+
$ /
) $
* *
+ $3
/ )
13 *
14%
Answer:
(onth Demand E5ponentia# Error %bso#ute
Deviation
'imp#e
(ovin&
%vera&e
Error %bso#ute
Deviation
>ei&hted
(ovin&
%vera&e
Error %bso#ute
Deviation
'moothin&
1 $
2 +
3 2 $.33
+ 3.+3 .23 .23 $.33 3.33 3.33 3.$ .$3 .$3
$ / $.+ 3.$2 3.$2 ).33 3.33 3.33 ).+ 2.23 2.23
) $ ).+/ *.11 *.11 ).33 *.)* *.)* +.1 $./3 $./3
* * /.*3 ,2.*3 2.*3 $3.33 ,3.33 3.33 $2. ,$.3 $.3
+ $3 +.) 1.3) 1.3) $3.33 3.33 3.33 +.) 1.3 1.3
/ ) /.1+ ,3.1+ 3.1+ $3.33 ,.33 .33 /.+ ,3.+3 3.+3
13 * *./1 ,3./1 3./1 *.)* ,3.)* 3.)* )./ 3.13 3.13
'um /.3* 23.32 $.33 22.33 ./3 22.23
(ean
1.3 3.2/ 3.*) 3.1 3.*3 3.33

E5ponentia# 'imp#e
(ovin&
%vera&e
>ei&hted
(ovin&
%vera&e
'moothin&
6"E /.3* $.33 ./3
(%D 3.2/ 3.1 3.33
.sin& (%D, the simp#e movin& avera&e is best. @owever, the wei&hted movin& avera&e does
better on 6"E.
Keywords: (%D, time, series, 6"E, error, avera&e, e5ponentia#
15&
1)3. 6a#cu#ate three forecasts usin& the fo##owin& data. "irst, for periods throu&h 13, deve#op the
e5ponentia##y smoothed forecasts usin& a forecast for period 3 DF3E of 123.3 and an a#pha of 3.3.
'econd, ca#cu#ate the three,period movin&,avera&e forecast for periods throu&h 13. Third, ca#cu#ate
the wei&hted movin& avera&e for periods throu&h 13, usin& wei&hts of .)3, .33, and .13. 6a#cu#ate
the mean abso#ute deviation D(%DE and the cumu#ative sum of forecast error D6"EE for each
forecastin& procedure. >hich forecastin& procedure wou#d you se#ect? >hy?
(onth Demand
1 123
2 11$
3 12$
11/
$ 12*
) 11
* 123
+ 12
/ 11)
13 13*
Answer:
(onth Demand E5ponentia# Error %bso#ute
Deviation
'imp#e
(ovin&
%vera&e
Error %bso#ute
Deviation
>ei&hted
(ovin&
%vera&e
Error %bso#ute
Deviation
'moothin&
1 123
2 11$
3 12$ 123.33
11/ 121.$3 ,2.$3 2.$3 123.33 ,1.33 1.33 121.$ ,2.$3 2.$3
$ 12* 123.*$ ).2$ ).2$ 11/.)* *.33 *.33 123. ).)3 ).)3
) 11 122.)3 ,+.)3 +.)3 123.)* ,/.)* /.)* 12. ,13.3 13.3
* 123 123.3 ,3.3 3.3 123.33 3.33 3.33 11+. 1.)3 1.)3
+ 12 123.33 3./* 3./* 123.33 3.)* 3.)* 11+./ $.13 $.13
/ 11) 121.22 ,$.22 $.22 11/.33 ,3.33 3.33 121.+ ,$.+3 $.+3
13 13* 11/.)$ 1*.3$ 1*.3$ 123.33 1*.33 1*.33 11+.+ 1+.23 1+.23
'um 11.1/ 3./$ 1.33 2.33 12.+3 22.23
(ean
1.)3 ).2+ 2.33 ).33 1.+3 *.1*

E5ponentia# 'imp#e
(ovin&
%vera&e
>ei&hted
(ovin&
%vera&e
'moothin&
6"E 11.1/ 1.33 12.+3
(%D ).2+ ).33 *.1*
.sin& (%D, the simp#e movin& avera&e is best. @owever, the e5ponentia# smoothin& does better
on 6"E.
Keywords: time, series, error, 6"E, (%D, error, e5ponentia#, avera&e
151
1). The marketin& department for a ma2or manufacturer tracks sa#es and advertisin& e5penditures each
month. Data from the past nine months and re&ression output appear in the fo##owin& tab#e. <nterpret
the e1uation coefficients and the va#ues for the coefficient of determination and the corre#ation
coefficient.
Month Sales (units)
Adertising
(!1"###)
1 860010 25
2 1340697 40
3 2020025 65
4 1410180 45
5 2170086 70
6 1780399 55
7 1560975 50
8 1130155 35
9 1910901 60
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.997
R Su!re 0.995
A$%u&te$ R
Su!re 0.994
St!n$!r$ 'rr(r 3298.324
O)&er*!ti(n& 9
A2O3A
Df
Re-re&&i(n 1
Re&i$u!l 7
T(t!l 8
Coefficients
Intercept 12312.05
A$*erti&in-
4/100005 2945.21
Answer: The re&ression e1uation is7
y:aNb;
'a#es DunitsE:12,312.3$N2/$.21T%dvertisin& DQ1,333sE
The intercept of 12,312 su&&ests that if no money were spent on advertisin&, sa#es wou#d be
12,312 units for that month. The s#ope may be interpreted as for every Q1,333 spent on
advertisin&, sa#es increase by a #itt#e over 2,/$ units.
The corre#ation coefficient of 3.//* shows a very stron& positive re#ationship between the
independent and dependent variab#es. The samp#e coefficient of determination is 3.//$, so the
#eve# of advertisin& e5penditure e5p#ains //.$K of the variation in sa#es.
Keywords: re&ression, coefficient, determination, corre#ation
152
1)$. % #oca# movin& company has co##ected data on the number of moves they have been asked to
perform over the past three years. (ovin& is hi&h#y seasona#, so the ownerOoperator, who is both
bur#y and hi&h#y educated, decides to app#y the mu#tip#icative seasona# method Dbased on a #inear
re&ression for tota# demandE to forecast the number of customers for the comin& year. >hat is his
forecast for each 1uarter?
233 233$ 233)
Ruarter Demand Ruarter Demand Ruarter Demand
1 23 1 2* 1 33
2 3 2 $ 2 $
3 $ 3 $$ 3 $$
33 3 3
Answer:
The seasona# factor ca#cu#ations for each year show7
2004 2004 2004 2005 2005 2005 2006 2006 2006 2006
Quarter Demand Se!& "!ct Quarter Demand Seas Fact Quarter Demand Seas Fact Avg SF
1 20 0.592 1 27 0.647 1 33 0.763 0.667
2 40 1.185 2 45 1.078 2 45 1.040 1.1014
3 45 1.333 3 55 1.317 3 55 1.272 1.307
4 30 0.889 4 40 0.958 4 40 0.925 0.924
The regression equation for total demand is y=120.33+19*year; for the fourth year
y=196.33. (This is assuming the regression is done in year sequence, i.e. year 1, year
2, year 3. If a regression is run using the actual year dates, the equation of the line is
y=-37936.7+19*year.) Both equations result in a forecast for 2007 of 196.33.
Dividing this total demand by 4 yields 49.08333.
Forecasts for the next four quarters are:
Reference: Time 'eries (ethods
Difficulty: @ard
Keywords: seasona#, forecast, mu#tip#icative
153
( )
( )
( )
( )
17 /.3+3 3.)* 32.*
27 /.3+3 1.13 $.3)
37 /.3+3 1.31 ).1$
7 /.3+3 3./2 $.3$
Quarter
Quarter
Quarter
Quarter
=
=
=
=

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Chapter 13 Forecasting

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