Operations Ch 3

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 use multiple variables to try to make predictions. -Naive forecasts are not worthwhile. -Naive forecasts are easy to understand. -Naive forecasts use a single previous value to forecast a future value.

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

Which of the following statements about forecast error is/are true? -Negative errors occur when the forecast is too high. -Negative errors occur when the forecast is too low. -Positive errors occur when the forecast is too low. -Forecast error is the difference between the actual and predicted values in a given period. -Positive errors occur when the forecast is too high.

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

In diffusion models, on what basis are predictions made? -Demand for an established product -Future inflation rates -Number of stores a retailer opens in a given period -Rate of adoption of new technology

-Rate of adoption of new technology

As a forecasting tool, the Delphi method is useful for what type of forecasting? -Sales of an existing product -Short-range forecasting -Technological forecasting

-Technological forecasting

Which of the following represents an error of zero on a control chart? -The lower control limit -The center line -The range of random variability -The upper control limit

-The center line

Which of the following are conditions for indicators to be valid? -The correlation between the variables must be relatively high. -The relationship between the variables must be a positive one. -The timing of the indicator's movement must make the prediction in time to be acted upon. -There must be a logical explanation between the movement of the indicator and the variable.

-The correlation between the variables must be relatively high. -The timing of the indicator's movement must make the prediction in time to be acted upon. -There must be a logical explanation between the movement of the indicator and the variable.

What is the correct order of the forecasting process?

Determine the Purpose Establish a Time Horizon Obtain, Clean, and Analyze Data Select a Forecasting Technique Make the Forecast Monitor the Forecast Errors

Exponential Smoothing Forecast Formula

F(t)=F(t-1) + (A(t-1) - F(t-1))

Linear Trend Equation

F= a + bt

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 Reason: The control chart method looks at each error individually and therefore provides more information, including information on possible bias in the forecast.

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 expected level of demand and the other is degree of accuracy

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

Ft=∑^(i=1)n(subscript of sigma)*(At−i)/n

Forecasts are the basis for many decisions and an essential input for what?

Matching supply with demand

The least squares line is the line that ____ the sum of the _____ vertical deviations of the data points from the line.

Minimizes Squared

Which of the following is the correct formula for the trend-adjusted exponential smoothing forecast? TAFt+1=St-Tt TAFt+1=St+Tt TAFt+1=St+1+Tt+1

TAFt+1=St+Tt

Which of the following statements is true about long-term forecasts?

They pertain to items that will take a long while to implement.

What are the quantitative types of forecasts?

Time-Series Associative

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

True

True or False: Forecasts covering a shorter time horizon tend to be more accurate than long-term forecasts.

True

Which of the following is the correct equation for the least squares regression line? Yc=a+bx Yc=a-bx Yc=b+ax

Yc=a+bx

Which of the following is the correct formula for the slope b? b=n∑xy+∑x∑y/n∑x2−(∑x)2 b=∑xy−∑x∑y/∑x2−(∑x)2 b=n∑xy−∑x∑y/n∑x2−(∑x)2

b=[n∑xy−∑x∑y]/[n∑x2−(∑x)2]

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

bias

r2 measures the degree of variation in the values of the _____ variable that is "explained" by the _________ variable.

dependent independent

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

greater

For an indicator to be valid, there should be ______ correlation between the two variables.

high

Focus forecasting uses the forecasting technique that has the ____ accuracy for the given data set among a set of possible forecasting methods.

highest

The Delphi Method is an ______ process which seeks to find a ____ forecast.

iterative consensus

The most common approach for forecasting cyclical data uses variables that relates to, and _____, the variable of interest.

leads

Executive opinions are often used to develop ____ ____ plans and ___ product development.

long range new

Which of the following statements is true about forecasting approaches? -Associative models use explanatory variables to predict the future. -Quantitative forecasts are always preferable to qualitative forecasts because the former deals with hard data. -Qualitative forecasts allow personal opinions to be included in the forecast. -Time-series models allow for the inclusion of human factors in the forecasting process.

-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 work well when there is no trend present in the data. -Both compare a period average to an overall average to find the seasonal relative or index. -Both average the values for a specific seasonal period, for example weekday morning rush hour, so find the period average.

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

Which of the following are possible sources of forecast errors? -Changes in the variables or relationships -Increasing linear trend -Irregular variations -Random variation -Incorrect forecasting method or interpretation

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

The essence of associative techniques is the development of an equation that summarizes the effects of _____.

predictor variables

Which of the following statements about time-series data is/are always true? -Time series only observe daily demand. -Forecasts using time series data try to find a relationship between the data and another variable. -Forecasts using time series data assume that past patterns will continue in the future. -Time series are observed at regular intervals.

-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 statements is NOT true about forecasts? -Forecasts farther into the future are more difficult to do accurately. -Forecasting aggregates of items (e.g., regional sales) accurately is easier than forecasting individual items. -If done carefully, forecasts very rarely are inaccurate.

-If done carefully, forecasts very rarely are inaccurate.

Which of the following is/are true statements about simple linear regression? -It applies only when one predictor variable is used. -It can be done with relatively small amounts of data, e.g. n=5. -It is important to plot the data to see if a linear model is appropriate.

-It applies only when one predictor variable is used. -It is important to plot the data to see if a linear model is appropriate.

Which of the following statements about exponential smoothing forecasts is/are true? -It is a sophisticated weighted averaging method -The smoothing constant α is always 0.1. -The previous forecast is adjusted by a percentage of the forecasting error. -The closer α is to 1, the greater the smoothing.

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

Which of the following statements about the standard error of the estimate is true? -It tells you which data point is most accurately predicted. -It generates the line with largest positive slope. -It measures the scatter of the data points around the line.

-It measures the scatter of the data points around the line.

Which of the following is a major weakness of the tracking signal approach? -The values are harder to compute -Its use of cumulative errors -Its range of ±4 or ±5 is too narrow

-Its use of cumulative errors

Forecasts that use subjective inputs such as opinions from consumer surveys, sales staff, managers, executives, and experts. -Judgmental forecasts -Time-series forecasts -Associative model

-Judgmental forecasts

Diffusion models tend to have lower accuracy than quantitative models. Given that, why might a firm use a diffusion model? -Services that have a high degree of variability -Lack of historical data -Lack of performance data on the current method

-Lack of historical data

Executive opinions are generally used for what type of forecasts? -Short-range -Medium-range -Long-range

-Long-range

Which is the correct interpretation of MSE? -MSE is the average absolute forecast error. -MSE is the average squared forecast error. -MSE is the average absolute percent forecast error.

-MSE is the average squared forecast error.

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

Deviations around the average value (i.e., the line) should be normally distributed. which of the following supports the assumption of normality. -A concentration of values close to the line -A large proportion of larger deviations -A small proportion of larger deviations -A wide spread of values around the line

-A concentration of values close to the line -A small proportion of larger deviations

Which of the following is/are disadvantages of consumer surveys? -A considerable amount of knowledge is required to correctly interpret the results for valid information. -Consumer opinion may be temporarily influenced by outside factors like sales pitches. -Consumers are unable to give direct feedback to companies. -It takes a long time to analyze results of a survey due to high response rates. -It is difficult to get a representative sample.

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

Which of the following statements about correlation is/are true? -A correlation close to -1 indicates a strong relationship between two variables. -A correlation of +1 is preferable to a correlation of -1. -A correlation close to +1 indicates a strong relationship between two variables. -A correlation > 0 indicates a positive relationship. -A correlation < 0 indicates a positive relationship.

-A correlation close to -1 indicates a strong relationship between two variables. -A correlation close to +1 indicates a strong relationship between two variables. -A correlation > 0 indicates a positive relationship.

Which of the following is/are true statements about simple linear regression? -All data points carry equal weight. -If the correlation is small, the predictor variable is not of much value and another variable may be better. -It cannot be used if there is time-dependence in the data.

-All data points carry equal weight. -If the correlation is small, the predictor variable is not of much value and another variable may be better.

Which of the following is/are disadvantages of the moving average forecast? -Random variations are smoothened out, making structural patterns less evident. -It is complicated to explain. -It is difficult to compute. -All the values of the average are weighted equally. -Potential loss of information of less recent values by decreasing the number of values.

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

Which of the following is an assumption regarding variations around the line for simple regression? -Data contain only random variation. -Trends are present in the data. -Cycles are present in the data.

-Data contain only random variation.

Which of following situations signify that a forecasting method may need to be adjusted or changed? -Bad weather has caused a spike in errors. -Forecast errors exhibit a pattern within a control chart. -Forecast errors fall outside the limits of a control chart.

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

Which of the following statements about forecasts is/are correct? -Forecasts only relate to predicting demand. -Forecasts enable managers to plan for the future. -Accurate forecasts are easy to produce. -Forecasts are the basis for virtually all decisions made in a business.

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

Which of the following are true of good forecasts? -Forecasts need not be in writing. -Forecasts should be cost-effective. -Forecasts should be in meaningful (understandable) units. -Forecasts should be accurate. -Forecasts should include only the planning time and not the time to implement the change.

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

Which of the following is/are true about forecasts? -It achieves higher accuracy to predict values for single items than for multiple items together. -The farther into the future we try to forecast, the less accurate the forecast becomes. -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. -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.

Which of the following statements about the steps in the forecasting process are true? -After the purpose of the forecast is determined, the next step is to select the forecasting technique. -The forecast may not perform as desired, so it is necessary to monitor the process. -Once the data is obtained, the next step is to establish a time horizon. -It is important to first determine the purpose of the forecast.

-The forecast may not perform as desired, so it is necessary to monitor the process. -It is important to first determine the purpose of the forecast.

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. -The salesforce is unable to determine long-term customer demand given bias caused by recent experiences. -The salesforce is an unbiased source of information about customers' wants and needs.

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

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. -The seasonal percentages in the additive model are referred to as as seasonal relatives. -A seasonal relative of 0.80 means that the period is 80% below the average. -A seasonal relative of 1.25 indicates that the period is 25% above the average.

-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.

Which of the following are components in time-series data? -Competitors' actions -Cycles -Market conditions -Trend -Outside forces -Random variation -Seasonality -Irregular variation

-Trend -Seasonality -Cycles -Irregular variation -Random variation

Which of the following statements is/are true about trend-adjusted exponential smoothing? -Unlike with trend analysis, the trend estimate can be adjusted if it changes. -Its ease of calculation makes it preferable to trend analysis. -It should be used instead of simple exponential smoothing when there is a trend present in the data. -Values for α and β are known for a specific problem, and the forecast is started off just like simple exponential smoothing.

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

Which of the following statements are true about starting exponential smoothing forecasts? -Use a naive forecast for F2 to start off the forecast series. -To forecast for period t, pick an arbitrary value for Ft-1. -Use an average of several values to start off the initial forecast for the forecast series.

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

Which of the following statements is/are not a correct characterization of salesforce opinions? -The salesforce has direct contact with customers and therefore have a good sense of what customers want. -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. -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. -The salesforce is a good, unbiased source of information about customers' wants and needs.

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. -You do not have to deal with the possibility of irrational behavioral patterns. -Information obtained from surveys can be easily interpreted.

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

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 cannot be calculated by hand, only using a spreadsheet. -The centered moving average typically requires more calculations.

1) The centered moving average works better when there is a trend in the data. 2) The centered moving average typically requires more calculations.

Which of the following is/are disadvantages of the weighted moving average forecast? -It does not work well for time series with trends or seasonality. -It is difficult to compute using a spreadsheet. -The value of n might be arbitrary. -It requires considerable effort to determine the weights.

1) The value of n might be arbitrary. 2) It requires considerable effort to determine the weights. 3) It does not work well for time series with trends or seasonality.

Which of the following is/are advantages of the moving average forecast? -It works well for all types of time series (stable, seasonal...) -It is easy to understand. -It smooths out random variation, making patterns more evident. -It is easy to compute. -You must find the value of n.

1. It smooths out random variation, making patterns more evident 2. It is easy to understand 3. It is easy to compute

Predictor variables are: -used in regression to predict values of the variable of interest. -variables whose values can be easily determined. -related to the variable of interest. -increasing or decreasing in value over time.

1. Used in regression to predict values of the variable of interest 2. Variables whose values can be easily determined 3. Related to the variable of interest

The seasonal relative, also known as the seasonal ____, is the seasonal percentage applied in the ______ model.

index multiplicative