Please do in word showing formulas or do in paper .Dont use excel. A ski repair
ID: 379598 • Letter: P
Question
Please do in word showing formulas or do in paper .Dont use excel.
A ski repair shop at a resort in Colorado sells replacement poles each season. The shop needs to develop a forecast of next season’s sales so that they can place an order for poles with their supplier well in advance of the beginning of the season. Sales data for the past five years are shown below. Compare the forecasts given by the following models.
Year: 1 2 3 4 5
Sales (units): 350 375 355 375 390
Develop forecasts using:
A 5 year moving average.
A weighted moving average model with weights of 0.2, 0.2, 0.1, 0.3, and 0.3 for years 1 through 5 respectively.
An exponential smoothing model with year 1 forecast of 380 and = 0.3
Explanation / Answer
Following formula have been used for arriving at Forecast values :
5 year moving average :
Forecast for next season ( period 6 ) = ( Sales year 1 + sales year 2 + Sales year 3 + Sales year 4 + Sales Year 5 ) / 5
5 year Weighted moving average :
= 0.2xSales year 1 + 0.2 x sales year 2 + 0..1 x Sales year 3 + 0.3 x Sales year 4 + 0.3 x Sales year 5
Exponential smoothing model with year 1 forecast of 380 :
Ft = alpha x St-1 + ( 1 – alpha)x Ft-1 = 0.3 x St-1 + 0.7 x Ft-1
Where,
Alpha = 0.3
Ft, Ft-1 = Forecast for period t and period t-1 respectively
St-1 = Actual sales for period t-1
Accordingly, Forecast for next season ( Year 6 ) = 375.60
Following table presents calculated values under above 3 options :
YEAR
SALES
FORECAST – 5 YEAR MOVING AVERAGE
FORECAST – WEIGHTED MOVING AVERAGE
FORECAST – EXPONENTIAL SMOOTHING AVERAGE
1
350
380
2
375
371
3
355
372.20
4
375
367.04
5
390
369.43
6
369
410
375.60
Thus forecast for next period :
5 YEAR MOVING AVERAGE
369
WEIGHTED MOVING AVERAGE
410
EXPONENTIAL SMOOTHING METHOD
375.60
YEAR
SALES
FORECAST – 5 YEAR MOVING AVERAGE
FORECAST – WEIGHTED MOVING AVERAGE
FORECAST – EXPONENTIAL SMOOTHING AVERAGE
1
350
380
2
375
371
3
355
372.20
4
375
367.04
5
390
369.43
6
369
410
375.60