Home Assignment 1 (Forecasting Methods) 1. A firm believes that its annual profit depends on its expenditures for research.

The information for the preceding six years is given below. Estimate the profit when the expenditure is 6 units ( Use linear regression method): Year 1 2 3 4 5 6 7 Expenditure in Rs (Corers) for Research (X) 2 3 5 4 11 5 6 Annual Profit in Rs (Thousand) (Y) 20 25 34 30 40 31 ?

2. Compute the sales forecast for the year 10 of a company, having following sales: Year Sales (in Lakhs) 1 6 2 8 3 11 4 23 5 29 6 34 7 40 8 45 9 56

3. Kids Toys (P) Ltd is a toy marketing company at Mumbai. The sales figures (in units) of a particular toy during the past 20 weeks are given below. Calculate the four weekly and eight weekly moving average forecasts for the given 20 weeks: Week 1 2 3 4 5 6 7 8 9 10 Actual Demand (units) 1,634 1,821 2,069 1,952 2,178 1,597 1,834 1,852 1,771 2,014 Week 11 12 13 14 15 16 17 18 19 20 Actual Demand (units) 2,395 2,683 1,936 2,076 2,103 1,699 2,387 1,854 1,521 1,726

4. LG TV has the following sales of its flat TV in NCR in the year 2011. Forecast the sales for the month of Jan, 2012 by using 2 month, and 3 month moving average:

Month Jan Feb Mar Apr May June

Actual sales (in thousand units) 10 12 13 16 19 23

Month Jul Aug Sep Oct Nov Dec

Actual sales (in thousand units) 26 30 28 18 16 14

5. In the above question, if the company wants to forecast 3 month moving average by giving higher weight to recent data as given below; re- forecast the sales for the month of Jan by using weighted moving average method: Weights Applied 3 2 1 Period Last month Two months ago Three months ago

6. The sales of Riva electrical car in the last twelve months in a retail outlet in Delhi is given below. Use method of weighted moving average to forecast the sales for Jan, 2012. The company is having weights as 0.50 for the immediate past, 0.30 for two periods below, and 0.20 for three periods before. Month Jan Feb Mar Apr May June Actual sales 145 110 100 140 130 140 Month Jul Aug Sep Oct Nov Dec Actual sales 160 165 180 170 150 140

7.

In Nov, a car dealer forecasted Dec demand for 142 Ford Mustangs. Actual Dec demand was 153 units. Taking smoothing constant = 0 .20, forecast Jan demand using exponential smoothing method.

8. A firm uses simple exponential smoothening with = 0.20 to forecast demand. The forecast for the first week of Jan was 400 units, whereas actual demand turned out to be 450 units.

a. Forecast the demand for the second week of Jan. b. Assume that the actual demand during the second week of Jan turned out to be 460 units. Forecast the demand up to Feb third week. The actual demand are as given below: Week Jan. Week 1 Week 2 Week 3 Week 4 Feb. Week 1 Week 2 Week 3 Actual demand 450 460 465 434 420 498 462

9. For the above problem compute the forecasts using the method of exponential smoothening when = 0.10, 0.40, 0.60, 0.80, 0.90. Compare the forecasts obtained in each of these cases. What are your inferences?

10. For the above questions (From question No. 3 to question No. 9), compute accuracy of forecasts for each question as per the format given below , and comment on the usefulness of the forecasting system:
Perio d Deman d Forecas t Forecas t Error SF E Absolute Deviatio n Cum Absolute Deviatio n MA D Absolut e Error (%) MAP E Sqare d Error MS E Trackin g Signal

11. The following data gives the sales data of milk(in litters):

Month Jan Feb Mar Apr May June

Actual sales 95 100 87 123 90 96

Month Jul Aug Sep Oct Nov Dec

Actual sales 75 78 106 104 89 83

(a) Use three months moving average to forecast sales in Jan, 2011. (b) Calculate running sum of forecast errors (RSFE), mean absolute deviation (MAD), mean squared errors (MSE), mean absolute percentage error (MAPE) for the above forecast technique. 12. (a) For the above given data, use single exponential smoothing method to forecast sales for the month of Jan, 2012; with = 0.20 and initial forecast of 100. (b) Calculate running sum of forecast errors (RSFE), mean absolute deviation (MAD), mean squared errors (MSE), mean absolute percentage error (MAPE) for the above forecast technique. (c) Compare the errors obtained from moving average method and exponential smoothing method. Witch method will you prefer? 13. The sales of TVs from Big Bazaar is as given below:

Month Jan Feb Mar Apr May

Actual sales 110 102 108 121 112

Month Jun Jul Aug Sep Oct

Actual sales 105 114 106 115 ?

Find out the forecasted sales for the month of Oct, using weighted moving average method, taking weights as 0.4 for immediate past, 0.3 for three periods before, 0.2 for two periods before, and 0.1 for three periods before.

14. The monthly sales of vada pav from Indian Food Point is as given below:

Month Jan Feb Mar Apr

Actual sales 10,000 30,000 40,000 40,000

Month May June Jul Aug

Actual sales 50,000 60,000 50,000 40,000

Develop the forecasted sales for the month of Sep, and calculate the running sum of forecast errors (RSFE), mean absolute deviation (MAD), mean squared errors (MSE), mean absolute percentage error (MAPE), for each of the following methods: (a) Use the moving average method with N = 3. (b) Employ weights of 0.5, 0.3, and 0.2 to obtain weighted moving average forecast for the same period. (c) Use single exponential smoothing method to forecast sales for the month of Sep; with = 0.40 and initial forecast of 100000. (d) Compare the errors obtained from moving average method, weighted moving average method, and exponential smoothing method. Witch method will you prefer?