Operations Management Exam 3 (Chapter 9)

Forecasting is a key component in customer relationship management. a. True b. False

a. True

In the context of demand planning, customers' wants and needs define the customer benefit package. a. True b. False

a. True

In the context of a fairly stable time series with relatively little random variability, which of the following statements is true of single exponential smoothing (SES)? a. Values of the smoothing constant larger than 0.5 place more emphasis on recent data. b. Exponential smoothing models completely forget past data if the smoothing constant is strictly between 0 and 1. c. Typical values for the smoothing constant are in the range of 1 to 1.5. d. Values of the smoothing constant smaller than 0.1 allow a forecast to react faster to changing conditions.

a. Values of the smoothing constant larger than 0.5 place more emphasis on recent data.

The mean absolute deviation (MAD) for the forecasts shown in the following table is: A:Month B:Forecast Demand C:Actual Demand A:April B:190 C:180 A:May B:175 C:200 A:June B:190 C:200 A:July B:240 C:220 A:August B:225 C:195 a. more than 10 but less than or equal to 20. b. more than 20 but less than or equal to 30. c. more than 30 but less than or equal to 40. d. more than 40 but less than or equal to 50.

a. more than 10 but less than or equal to 20.

____________ is the difference between the observed value of the time series and the forecast. a.Forecast error b.Forecast consumption c.Forecast precision d. Forecast density

a.Forecast error

A __________ is the underlying pattern of growth or decline in a time series. a.trend b.planning horizon c.forecast error d.bias

a.trend

Alex, a manager at Symbic Inc., plotted the company's total energy costs of 1 billion dollars over the past 10 years on a chart. The chart suggested that the energy costs appear to be increasing in a fairly predictable linear fashion and that the energy costs are related to time by a linear function Y t = 3 + 5t, where Y t represents the estimate of the energy cost in year t. Given the equation, which of the following is the value of the intercept of the straight line that best fits the time series? a. 1 b. 3 c. 5 d. 10

b. 3

In the context of causal forecasting models with multiple regression, an R-squared (R 2) value of 0.70 means that 30 percent of the variation in the dependent variable is explained by the independent variable. a. True b. False

b. False

The following table shows the data for the sales of tennis rackets at a store for 4 consecutive months. Find the forecast error in month 4 using a 3-month moving average. Month A:1 B:2 C:3 D:4 Sales A:80 B:95 C:125 D:110 a. The forecast error in month 4 is less than or equal to 5. b. The forecast error in month 4 is more than 5 but less than or equal to 10. c. The forecast error in month 4 is more than 10 but less than or equal to 15. d. The forecast error in month 4 is more than 15.

b. The forecast error in month 4 is more than 5 but less than or equal to 10.

___________________________ is a method for building a statistical model that defines a relationship between a single dependent variable and one or more independent variables, all of which are numerical. a.The Delphi method b.Regression analysis c.Judgmental forecasting d. The Cooke method

b.Regression analysis

___________________ is based on the assumption that the future will be an extrapolation of the past. a.Judgmental forecasting b.Statistical forecasting c.The Delphi method d. The Cooke method

b.Statistical forecasting

_____ is a common approach to gather data for judgmental forecasts. a. A moving average model b. Regression analysis c. A survey questionnaire d. Single exponential smoothing

c. A survey questionnaire

The following table shows the sales data of server computers of Ziffcore Inc. for the past 5 years. The management plotted the data on a chart. The chart suggested that the sales appear to be increasing in a fairly predictable linear fashion and that the sales are related to time by a linear function Y t = 240 + 340t. Using simple linear regression, calculate the forecast for sales in year 6. A:Year B:Sales A:1 B:580 A:2 B:920 A:3 B:1260 A:4 B:1600 A:5 B:1940 a. The forecast for sales in year 6 is more than 1800 but less than or equal to 2000. b. The forecast for sales in year 6 is more than 2000 but less than or equal to 2200. c. The forecast for sales in year 6 is more than 2200 but less than or equal to 2400. d. The forecast for sales in year 6 is more than 2400 but less than or equal to 2600.

c. The forecast for sales in year 6 is more than 2200 but less than or equal to 2400.

The following table shows the data for the sales of a new music album at a store for 4 consecutive months. Find the forecast for the next month using a 3-month moving average. Month A:1 B:2 C:3 D:4 Sales A:112 B:105 C:125 D:118 a. The forecast for the next month is more than 90 but less than or equal to 100. b. The forecast for the next month is more than 100 but less than or equal to 110. c. The forecast for the next month is more than 110 but less than or equal to 120. d. The forecast for the next month is more than 120 but less than or equal to 130.

c. The forecast for the next month is more than 110 but less than or equal to 120.

Moving average (MA) methods work best when: a. a long planning horizon is involved. b. a cyclical pattern is observed in a time series. c. demand is relatively stable and consistent. d. there is a major trend in a time series.

c. demand is relatively stable and consistent.

If the time series in an exponential smoothing model exhibits a negative trend, the _____. a. mean square error will be negative b. value of smoothing constant will either be less than zero or greater than one c. forecast will overshoot the actual values d. future forecasts will rely solely upon expertise of people in developing forecasts

c. forecast will overshoot the actual values

The mean absolute percentage error (MAPE) for the forecasts shown in the following table is: A:Month B:Forecast Demand C:Actual Demand A:April B:110 C:100 A:May B:150 C:125 A:June B:160 C:170 A:July B:110 C:130 A:August B:150 C:180 a. less than or equal to 5 percent. b. more than 5 percent but less than or equal to 10 percent. c. more than 10 percent but less than or equal to 15 percent. d. more than 15 percent.

c. more than 10 percent but less than or equal to 15 percent.

In the Delphi method of judgmental forecasting, _____. a. predictions are based on the assumption that the future will be an extrapolation of the past b. predictions are based on one or more independent variables, all of which are numerical c. people from outside an organization are not eligible to make predictions d. experts are not consulted as a group to make predictions

d. experts are not consulted as a group to make predictions

In the context of forecasting errors, _____ eliminates the measurement scale factor. a. normalized mean signed deviation b. mean absolute deviation c. normalized root mean square error d. mean absolute percentage error

d. mean absolute percentage error

An exponential smoothing model must have a smoothing constant (α) _____ to be roughly equivalent to a moving average model with a seven-month moving average. a. less than or equal to 0.10 b. more than 0.10 but less than or equal to 0.15 c. more than 0.15 but less than or equal to 0.20 d. more than 0.20

d. more than 0.20