Forecasts and actual sales of MP3 players at Just Say Music are as follows: Mont
ID: 375559 • Letter: F
Question
Forecasts and actual sales of MP3 players at Just Say Music are as follows:
Month Forecast Actual Sales
March 150 170
April 220 229
May 205 192
June 256 241
July 250 238
August 260 210
September 270 225
October 280 179
Plot the data and provide insights about the time series. (Use Microsoft Excel and attach the time series graph)
What is the forecast for November, using a two-period moving average?
What is the forecast for November, using a three-period moving average?
Compute mean square error (MSE) for the two- and three-period moving average models and compare your results.
Find the single exponential smoothing model by evaluating the MSE for Alpha 0.5. How does this model compare with the best moving average model found in 2d?
Explanation / Answer
1) Forecast using two-period moving average
Forecast for November = (225 + 179 )/ 2 = 202
2) Forecast using three-period moving average
Forecast for November = 210 + 225 + 179 /3 = 204.67 or 205 (rounded)
3) MSE of two period moving average = 634
MSE of three period moving average = 900
4) for alpha 0.5, MSE = 1259
Month Forecast Actual 2-period moving average Error*Error 3-period moving average Error*Errror March 150 170 - - April 220 229 - - May 205 192 200 56 - June 256 241 211 930 197 1936 July 250 238 217 462 221 300 Aug 260 210 240 870 224 187 Sept 270 225 224 1 230 22 Oct 280 179 218 1482 224 2055 Nov 202 205 MSE = 634 MSE = 900