Week 3

Which of the following statements about naive forecasting are true? -Naive forecasts are easy to understand. -Naive forecasts use multiple variables to try to make predictions. -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 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.

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 information 4. Select a forecasting technique 5. Make the forecast 6. Monitor the forecast

Bias is the persistent tendency for forecasts to do what? -Be greater or less than the actual values -Have forecast errors too close to zero -Be greater than the actual values -Be less than the actual values

Be greater or less than the actual values

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

Blank 1: minimizes Blank 2: squared

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

Blank 1: time Blank 2: ordered

Which of the following is the correct formula for the linear trend equation? F=b+at F=b-at F=a-bt F=a+bt

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 following situations signify that a forecasting method may need to be adjusted or changed? Forecast errors exhibit a pattern within a control chart. Bad weather has caused a spike in errors. 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 are the basis for virtually all decisions made in a business. Forecasts enable managers to plan for the future. Accurate forecasts are easy to produce. Forecasts only relate to predicting demand.

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

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

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

Which of the following statements about time-series data is/are always true? -Time series only observe daily demand. -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 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.

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

If done carefully, forecasts very rarely are inaccurate.

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.

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

Which of the following statements about the steps in the forecasting process are true? -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. -After the purpose of the forecast is determined, the next step is to select the forecasting technique.

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. 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.

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 measures the scatter of the data points around the line. It generates the line with largest positive slope.

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.

Judgemental 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 Lack of performance data on the current method Services that have a high degree of variability

Lack of historical data

Executive opinions are generally used for what type of forecasts?

Long-range

Which is the correct interpretation for MAD? MAD represents the average absolute percent forecast error. MAD represents the average absolute forecast error. MAD represents the average squared forecast error.

MAD represents the average absolute forecast error.

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

MAPE is the average absolute percent error.

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

Rate of adoption of new technology

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

Technological forecasting

Which of the following are considerations to be taken into account when choosing a forecasting technique? The availability of data. The availability of computer software. The analyst's preferences for certain methods. The cost of the method.

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

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

The center line

What is plotted on a control chart? The actual values The forecast values The errors

The errors

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

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

highest accuracy

Trend analysis develops an equation that will describe the trend present in data. The trend may be ___ or non-linear.

linear

Executive opinions are often used to develop ___ - ___plans and ___ product development.

long- range new

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

two or more of the most recent

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

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

Blank 1: iterative Blank 2: consensus

Which of the following is the correct formula for forecast error in period t? et=Ft-At et=At+Ft et=At-Ft

et=At-Ft

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

highest

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

predictor variables

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

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

What limits are typically used with the tracking signal? 0 ±1 ±2 ±3 ±4

±4

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

Value of the time series

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

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

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

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

Which of the following statements is/are not a correct characterization of salesforce opinions? -In every time, the sales people are able to distinguish between what customers would like to do and what they actually will do. -The salesforce has direct contact with customers and therefore have a good sense of what customers want. -The salesforce is a good, unbiased source of information about customers' wants and needs.

-In every time, the sales people are able to distinguish between what customers would like to do and what they actually will do. -The salesforce is a good, unbiased source of information about customers' wants and needs.

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

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

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

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

Blank 1: poor, bad, weak, or low Blank 2: moderate, okay, or decent

What are some commonly encountered nonlinear trend types? Exponential trend Sine curve Growth curve Parabolic trend Life cycle trend

Exponential trend Growth curve Parabolic trend Life cycle trend

Which of the following is the correct formula for the linear trend equation? F=b-at F=a+bt F=b+at F=a-bt

F=a+bt

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

MSE is the average squared forecast error.

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

Number of periods

Which of the following are considerations to be taken into account when choosing a forecasting technique? The accuracy of the method. The availability of data. The type of data. The analyst's preferences for certain methods.

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

Which of the following is/are advantages of consumer surveys? -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. -You do not have to deal with the possibility of irrational behavioral patterns.

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

Correlation measures: only the direction of the relationship between two variables. both the strength and direction of the relationship between two variables. only the strength of the relationship between two variables.

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

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

no bias in the forecast