Chapter 3

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

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

Deviations around the average value (i.e., the line) should be normally distributed. which of the following supports the assumption of normality.

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

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 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.

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

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.

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

Blank 1: highest, best, most, greatest , or maximum

Executive opinions are often used to develop _____ - _____ plans and_______ product development.

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

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

Short-term forecasts pertain to ongoing_____ . Long-term forecasts are an important_________ planning tool.

Blank 1: operations Blank 2: strategic

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

Time series data is a___ -____ sequence of observations taken at regular intervals.

Blank 1: time Blank 2: ordered

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 are possible sources of forecast errors?

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

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

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

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

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 n-period weighted moving average?

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

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 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.

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

Intercept

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 requires considerable effort to determine the weights. The value of n might be arbitrary.

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 disadvantages of consumer surveys? (Check all that apply.)

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.

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

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

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 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

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

Lack of historical data

What are some commonly encountered nonlinear trend types?

Life cycle trend Parabolic trend Exponential trend Growth curve

What type of relationship should there be between an indicator and the movements of the variable?

Logical

Executive opinions are generally used for what type of forecasts?

Long-range

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

Number of periods

In diffusion models, on what basis are predictions made?

Rate of adoption of new technology

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

Seasonality Random variation Trend Cycles Irregular variation

Which of the following are ways to improve forecast accuracy?

Shorten the lead time of responding to forecasts. Maintain accurate and up-to-date information. Shorten the forecasting time horizon. Increase the flexibility of operations.

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

Slope

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

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

Which of the following are conditions for indicators to be valid?

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

In the formula for correlation, what does the r represent?

The correlation coefficient

Which of the following are the assumptions underlying regression analysis?

The deviations around the line should be normally distributed. Variations around the line are random. Predictions are not made outside the range of observed values.

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 about the steps in the forecasting process are true?

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 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

In the formula for correlation, what does the y represent?

The value for one of the variable

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

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

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

Time-series Associative

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

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

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

Yc=a+bx

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 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.

Which of the following is the correct formula for the slope b?

b=n∑xy−∑x∑y/n∑x2−(∑x)2

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

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

high

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

highest accuracy

In the formula for correlation, the term n appears _____.

in the numerator and denominator

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

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

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.