The Carbondale Hospital is considering the purchase of a new ambulance. The deci
ID: 390998 • Letter: T
Question
The Carbondale Hospital is considering the purchase of a new ambulance. The decision will rest partly on the anticipaled mileage to be driven next year. The miles driven during the past 5 years are as follows M eage 3.1 4,000 3.450 a)Using a 2-year moving average, te forecast for year 6. 3825 mies (roundyourresponse totho neareat whole number) b) if a 2 year mowing average is used to make the forecast,the MAD bsed on this-125 mies pround your response to one deoimal placel. (Hfint You wit have onty 3 years of matched deta) c) The forecast for year6 using a weighted The MAD fo the forecast developed sing a weighted 2 year moving average wth we tsof045 and055·mies rundyorresponse t ore dorn" pla e Mnt Yo wnave only 3 y 2-year moving average with weights of 0.45 and 0.55 (the weight of 0.55 is for the most recent period)- 3823 miles (round your response to the nearest whole number) so, man hed dataExplanation / Answer
Solution:
(a) 2-year moving average:
Forecast for year 6 = Mileage for (Year 5 + Year 4) / 2
Forecast for year 6 = (3800 + 3850) / 2
Forecast for year 6 = 3,825 miles
(b) 2-year moving average (MAD):
Mean Absolute Deviation (MAD) is calculated as,
MAD = Sum of absolute values of (Actual - Forecast) / Number of periods
Forecasted sales for year 3 = (4000 + 3100) / 2 = 3550
Forecasted sales for year 4 = (3450 + 4000) / 2 = 3725
Forecasted sales for year 5 = (3850 + 3450) / 2 = 3650
MAD = Absolute values of [(3450 - 3550) + (3850 - 3725) + (3800 - 3650)] / 3
MAD = (100 + 125 + 150) / 3
MAD = 125 miles
(c) Weighted 2-year moving average:
Forecast for year 6 = (W1 x Y5) + (W2 x Y4)
where,
W = weight, Y = year
Forecast for year 6 = (0.55 x 3800) + (0.45 x 3850)
Forecast for year 6 = 3823 miles
MAD Calculation:
Forecasted sales for year 3 = (0.55 x 4000) + (0.45 x 3100) = 3595
Forecasted sales for year 4 = (0.55 x 3450) + (0.45 x 4000) = 3697.5
Forecasted sales for year 5 = (0.55 x 3850) + (0.45 x 3450) = 3670
MAD = Absolute values of [(3450 - 3595) + (3850 - 3697.5) + (3800 - 3670)] / 3
MAD = (145 + 152.5 + 130) / 3
MAD = 142.5 miles