OM chapter 2 questions

Identify the correct formula to determine the upper control limit of a control chart to monitor the forecast.

0+z MSE

A firm is forecasting the sales of carpets based on the number of building permits issued in their county. Which technique are they using?

Associative model

Bias is the persistent tendency for forecasts to do what?

Be greater or less than the actual values

Executive opinions are often used to develop___________ ___________ plans and ___________ product development.

Blank 1: long Blank 2: range or term Blank 3: new

Which of the following statements is correct?

Both forecast accuracy and cost are important factors to consider in choosing a forecasting method

Which of the following is/are disadvantages of the weighted moving average forecast?

It requires considerable effort to determine the weights. It does not work well for time series with trends or seasonality. The value of n might be arbitrary.

What is plotted on a control chart?

The errors

True or false: Seasonal variation can occur on a daily or weekly basis, not just a monthly or quarterly basis.

True

A tracking signal compares the cumulative forecast error to the MAD in order to detect any ______________ in errors over time.

bias

True or false: The expected level (value) of the forecasted quantity is the most important aspect of the forecast.

false Two aspects of forecasts are important. One is the expected level of demand; the other is the degree of accuracy that can be assigned to a forecast.

Forecast accuracy for groups of items tends to be ______ than for individual items.

greater

The seasonal relative, also known as the seasonal ___________ is the seasonal percentage applied in the ___________ model

index multiplicative

The Delphi Method is an __________ process which seeks to find a _________ forecast.

iterative consensus

Which of the following is used to calculate the standard deviation of the distribution of errors?

s = MSE (squareroot)

in time-series data, _____ are regularly repeating upward or downward movements in series values that can be tied to recurring events.

seasonal variations In time-series data, seasonal variations are regularly repeating upward or downward movements in series values that can be tied to recurring events.

Time series data is a ___________-_________ sequence of observations taken at regular intervals.

time-ordered

With respect to the patterns formed by time-series data, _____ refers to a long-term upward or downward movement in the data.

trend

The moving average forecast uses ______ actual data values to generate a forecast.

two or more of the most recent

Which of the following is/are disadvantages of consumer surveys? (Check all that apply.)

A considerable amount of knowledge is required to correctly interpret the results for valid information. It is difficult to get a representative sample. Consumer opinion may be temporarily influenced by outside factors like sales pitches.

Which of the following is/are disadvantages of the moving average forecast?

All the values of the average are weighted equally. Potential loss of information of less recent values by decreasing the number of values.

Forecasting technique that uses explanatory variables to predict future demand.

Associative model

Which of the following statements is true about forecasting approaches?

Associative models use explanatory variables to predict the future. Qualitative forecasts allow personal opinions to be included in the forecast.

What are the similarities of using the centered moving average method and the simple moving average method?

Both compare a period average to an overall average to find the seasonal relative or index. Both work well when there is no trend present in the data.

Which of the following are components in time-series data?

Cycles Seasonality Random variation Irregular variation Trend

True or false: The tracking signal method looks for bias in the forecast and is therefore preferred to the control chart method of monitoring forecast errors.

False

Which of the following statements about forecast error is/are true?

Forecast error is the difference between the actual and predicted values in a given period. Negative errors occur when the forecast is too high. Positive errors occur when the forecast is too low.

Which of following situations signify that a forecasting method may need to be adjusted or changed?

Forecast errors fall outside the limits of a control chart. Forecast errors exhibit a pattern within a control chart.

no error in the forecast

Forecasts are expected to have error; tracking signals are used to determine whether error is biased.

Which of the following statements about forecasts is/are correct?

Forecasts enable managers to plan for the future. Forecasts are the basis for virtually all decisions made in a business.

Which of the following is/are elements of good forecasts?

Forecasts should be cost-effective. Forecasts should be reliable. Forecasts should be easy to understand and use.

Which of the following are true of good forecasts?

Forecasts should be in meaningful (understandable) units. Forecasts should be cost-effective. Forecasts should be accurate.

Which of the following statements about time-series data is/are always true?

Forecasts using time series data assume that past patterns will continue in the future. Time series are observed at regular intervals.

Which of the following is the correct formula for the exponential smoothing forecast?

Ft=Ft-1+α(At-1-Ft-1)

Which of the following is the correct formula for an n-period moving average forecast for time period t?

Ft=∑i=1nAt−i/ n

Which of the following statements is NOT true about forecasts?

If done carefully, forecasts very rarely are inaccurate.

Which of the following are possible sources of forecast errors?

Irregular variations Changes in the variables or relationships Incorrect forecasting method or interpretation Random variation

Which of the following is/are advantages of the weighted moving average forecast?

It gives more recent values higher weight. It is more reflective of the most recent occurrences.

Which of the following is/are true about forecasts?

It is assumed that any patterns or causal systems that were in place in the past will continue in the future. There will generally be some inaccuracy in the forecast, i.e., the actual values will differ from forecasted values. The farther into the future we try to forecast, the less accurate the forecast becomes.

Which of the following is/are advantages of the moving average forecast?

It is easy to understand. It smooths out random variation, making patterns more evident. It is easy to compute.

Which of the following statements is/are true about trend-adjusted exponential smoothing?

It should be used instead of simple exponential smoothing when there is a trend present in the data. Unlike with trend analysis, the trend estimate can be adjusted if it changes.

Which of the following is/are advantages of the moving average forecast?

It smooths out random variation, making patterns more evident. It is easy to understand. It is easy to compute.

Which of the following is a major weakness of the tracking signal approach?

Its use of cumulative errors

Forecasts that use subjective inputs such as opinions from consumer surveys, sales staff, managers, executives, and experts.

Judgmental forecasts

Diffusion models tend to have lower accuracy than quantitative models. Given that, why might a firm use a diffusion model?

Lack of historical data Diffusion models are used for things like new products. Even with high variability, more accurate quantitative methods are available.

Executive opinions are generally used for what type of forecasts?

Long-range; This approach is often used as a part of long-range planning and new product development.

Which is the correct interpretation for MAD?

MAD represents the average absolute forecast error.

Which is the correct interpretation of MAPE?

MAPE is the average absolute percent error.

Which of the following is the correct formula for MAPE?

MAPE=∑|Actualt−Forecastt|ActualtX100/n

Which of the following statements about naive forecasting are true? (Check all that apply.)

Naive forecasts can be used with stable time series, with seasonal variations, or with trends. Naive forecasts are easy to understand. Naive forecasts use a single previous value to forecast a future value.

In diffusion models, on what basis are predictions made?

Rate of adoption of new technology

Which of the following is the correct formula for the previous forecast plus smoothed error using trend-adjusted exponential smoothing?

St=TAFt+α(At-TAFt)

strong bias in the forecast

Strong bias is indicated by values greater than +/- 3.

A number of different approaches can be used to obtain a starting forecast. Which of the following would be appropriate?

Subjective value Actual for the prior period Average of first several periods

As a forecasting tool, the Delphi method is useful for what type of forecasting?

Technological forecasting

Which of the following represents an error of zero on a control chart?

The center line

What are the differences of using the centered moving average method and the simple moving average method?

The centered moving average works better when there is a trend in the data. The centered moving average typically requires more calculations.

Which of the following statements about exponential smoothing forecasts is/are true?

The previous forecast is adjusted by a percentage of the forecasting error. It is a sophisticated weighted averaging method

Which of the following statements is a correct characterization of salesforce opinions?

The salesforce has a sense of what customers want because of their direct contact with customers.

Which of the following statements is/are not a correct characterization of salesforce opinions?

The salesforce is a good, unbiased source of information about customers' wants and needs. While the customer may not be able to predict whether s/he will actually do what s/he wants, a salesperson can predict the follow-through.

Which of the following statements is/are true about the seasonal relative? (Check all that apply.)

The seasonal percentages in the multiplicative model are referred to as as seasonal relatives. A seasonal relative of 1.25 indicates that the period is 25% above the average.

From the list of forecasting approaches identify all those that are the quantitative type.

Time-series Associative

True or false: Forecasts are the basis of an organization's schedules.

True Forecasts are the basis of an organization's schedules; this is why forecast accuracy is critical. Inaccurate forecasts lead to high costs and/or dissatisfied customers.

Which of the following statements are true about starting exponential smoothing forecasts?

Use a naive forecast for F2 to start off the forecast series. Use an average of several values to start off the initial forecast for the forecast series.

Which of the following is/are advantages of consumer surveys? (Check all that apply.)

You can get information that may be unavailable anywhere else. Consumers are able to give direct feedback to companies.

Which of the following is the correct formula for forecast error in period t?

et=At-Ft

__________________ accuracy for the given data set among a set of possible forecasting methods.

highest

When applying focus forecasting, the method with the ______ is chosen to forecast the next time period.

highest accuracy

Executive opinions are generally used for what type of forecasts?

long-range

A(n) _____ uses a single previous value of a time series as the basis of a forecast. This approach can be used with a stable series, with seasonal variations, or with trend.

naive forecast

A value of zero (0) for a tracking signal indicates ______.

no bias in the forecast

A value of zero (0) for a tracking signal indicates____________

no bias in the forecast This would be perfect. The forecast has zero bias.

What limits are typically used with the tracking signal?

the answer is +/- 4 ±4 - Reason: Will sometimes also use ±5. ±3 Reason: This is too small for there to be bias. ±2 Reason: This is too small for there to be bias. ±1 Reason: This is too small for there to be bias. 0 Reason: This would be perfect. The forecast has zero bias.