1. Sales of quilt covers at Bud Banis’ department store in Carbondale over the past year are shown below. Management prepared a forecast using a combination of exponential smoothing and its collective judgment for the 4 months (March, April, May, and June):
MONTH UNIT SALES MANAGEMENT’S FORECAST
July 100
August 93
September 96
October 110
November 124
December 119
January 92
February 83
March 101 120
April 96 114
May 89 110
June 108 108
a. Compute MAD and MAPE for management’s technique.
b. Do management’s results outperform (i.e., have smaller MAD and MAPE than) a naive forecast?
c. Which forecast do you recommend, based on lower forecast error? PX
2. Attendance at Orlando’s newest Disney like attraction, Lego World, has been as follows:
QUARTER GUESTS (IN THOUSANDS) QUARTER GUESTS (IN THOUSANDS)
Winter Year 1 73 Summer Year 2 124
Spring Year 1 104 Fall Year 2 52
Summer Year 1 168 Winter Year 3 89
Fall Year 1 74 Spring Year 3 146
Winter Year 2 65 Summer Year 3 205
Spring Year 2 82 Fall Year 3 98
Compute seasonal indices using all of the data. PX
3. Storrs Cycles has just started selling the new Cyclone Mountain bike, with monthly sales as shown in the table. First, co-owner Bob Day wants to forecast by exponential smoothing by initially setting February’s forecast equal to January’s sales with α=.1. Co-owner Sherry Snyder wants to use a three-period moving average.
SALES BOB SHERRY BOB’S ERROR SHERRY’S ERROR
January 400 —
February 380 400
March 410
April 375
May
a. Is there a strong linear trend in sales over time?
b. Fill in the table with what Bob and Sherry each forecast for May and the earlier months, as relevant.
c. Assume that May’s actual sales figure turns out to be 405. Complete the table’s columns and then calculate the mean absolute deviation for both Bob’s and Sherry’s methods.
d. Based on these calculations, which method seems more accurate? PX
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