Chapter 3: Forecasting

In the equations for the coefficients of a line, what is the y term?

0+zSqrtMSE

Put the steps in the forecasting process in the correct order, starting at the top.

1. Determine the purpose of the forecast 2. Establish a time horizon 3. Obtain, clean, and analyze data 4. Select a forecasting technique 5. Make the forecast 6. Monitor the forecast

Which of the following statements about correlation is/are true?

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

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.

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

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

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

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

Which of the following is the correct formula for the linear trend equation?

F=a+bt

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

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.

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 are true of good forecasts?

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

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

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

Which of the following is the correct formula for the n-period weighted moving average?

Ft = wt-n(At-n) +... +wt-2(At-2) + wt-1(At-1) +... + wt-n(At-n)

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

Highest

Which of the following is/are true statements about simple linear regression?

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

Which of the following are implications of accurate short-term forecasts?

Increased confidence, which would allow the diversion of resources to longer-term planning. Increased profits through improved operations. Greater credibility throughout the organization.

Which of the following statements about the steps in the forecasting process are true?

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.

Which of the following is/are true statements about simple linear regression?

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

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

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

Which of the following statements about the standard error of the estimate is true?

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

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

Judgmental forecasts

Executive opinions are generally used for what type of forecasts?

Long-range

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 is the correct interpretation of MSE?

MSE is the average squared forecast error.

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

Matching supply with demand

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

Naive forecasts are easy to understand. 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.

Which of the following are possible sources of forecast errors?

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

In the equations for the coefficients of a line, what is the b term?

Slope

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

Which of the following are considerations to be taken into account when choosing a forecasting technique?

The cost of the method. The availability of data. The availability of computer software.

What is plotted on a control chart?

The errors

Which of the following is/are true about forecasts?

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 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 are considerations to be taken into account when choosing a forecasting technique?

The type of data. The availability of data. The accuracy of the method.

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

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

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

Time - ordered

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

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

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

True

Which of the following is the correct formula for the current trend estimate using trend-adjusted exponential smoothing?

Tt=Tt-1+β(TAFt-TAFt-1-Tt-1)

In the equations for the coefficients of a line, what is the y term?

Value of the time series

Which of the following is the correct equation for the least squares regression line?

Yc=a+bx

Which are the correct interpretations of a and b in the trend equation F=a+bt?

a is the intercept, b is the slope of the line.

Correlation measures:

both the strength and direction of the relationship between two variables.

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

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

highest accuracy

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.

lead

Executive opinions are often used to develop _________ - __________ plans and __________ product development.

long-range, new

A value of 0.25 or less of r2 indicates a __________ predictor. A value between 0.25 and 0.8 indicates a _________ predictor.

low, decent

The least squares line is the line that __________ the sum of the ___________ vertical deviations of the data points from the line.

minimizes, squared

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

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

predictor variables

Predictor variables are:

related to the variable of interest. variables whose values can be easily determined. used in regression to predict values of the variable of interest.

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

seasonal variations

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

two or more of the most recent

Cycles are _____ movements similar to seasonal variations but of _____ duration.

up-and-down; longer