LS CH 3 - Forecasting

Advantages of consumer surveys

1) Able to give direct feedback to companies. 2) Get information that may be unavailable anywhere else.

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

1) All data points carry equal weight 2) If the correlation is small, the predictor variable is not of much value and another variable may be better

Which of the following are true of good forecasts

1) Forecasts should be accurate 2) Forecasts should be cost-effective. 3) Forecasts should be in meaningful (understandable) units

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

1) Greater credibility throughout the organization 2) Increased profits through operations 3) Increased confidence, which would allow the diversion of resources to longer-term planning

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

1) The correlation between the variables must be relatively high 2) There must be a logical explanation between the movement of the indicator and the variable 3. The timing of the indicator's movement must make the prediction in time to be acted upon.

Incorrect characterization of salesforce opinions

1) While the customer may not be able to predict whether he will actually do what he wants, a salesperson can predict the follow-through. 2) The salesforce is a good, unbiased source of information about customers' wants and needs.

Steps in the forecasting process

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

What are possible sources of forecast errors?

1. Irregular variations 2. Random variation 3. Changes in the variables or relationships 4. Incorrect forecasting method or interpretation

Advantages of the Weighted Moving Forecast

1. It gives more recent values higher weight 2. It is more reflective of the most recent occurrences

Which of the following are true about forecasts?

1. It is assumed that any patterns or casual systems that were in place in the past will continue in the future 2. The farther into the future we try to forecast, the less accurate the forecast becomes 3. There will generally be some inaccuracy in the forecast, i.e., the actual values will differ from forecasted values.

Advantages of the Moving Average Forecast

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

Which of the following are elements of good forecasts?

1. The forecast should be reliable 2. The forecast should be timely 3. The forecast should be cost-effective

Components in Time-Series Data

1. Trend 2. Seasonality 3. Cycles 4. Irregular Variations 5. Random Variations

Predictor Variables are:

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

Associative Model

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

1. Average of first several periods 2. Subjective value 3. Actual for the prior period

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

Bias

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

1) Poor 2) Moderate

A value of 0.25 or less of R^2 indicates a ___ predictor. A value between 0.25 and 0.8 indicates a ___ predictor.

1. Less 2. Actual Values

Bias is the persistent tendency of a forecast to be greater than or ____ than the ____ ____ of a time series.

Which of the following is correct?

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

Correlation measures:

Both the strength and direction of the relationship between two variables

1) up-and-down 2) Longer

Cycles are ___ movements similar to seasonal variations but of ___ duration

1) Long-range 2) New

Executive opinions are often used to develop _____ - ______ plans and ____ product development

Exponential Smoothing Forecast Formula

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

Linear Trend Equation Formula

F=a+bt

Highest

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

Judgmental Forecasts

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

Which of the following statements is NOT true about forecasts?

If done carefully, forecasts very rarely are inaccurate

Rate of adoption of new technology

In diffusion models, on what basis are predictions made?

Y - Intercept

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

Y - Intercept

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

In the numerator and denominator

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

Correct Formula for the Previous Forecast plus smoothed error using trend-adjusted exponential smoothing

S(t)=TAF(t) + (A(t) - TAF(t))

True

Seasonal variation can occur on a daily or weekly basis, not just a monthly or quarterly basis

1) Operations 2) Strategic

Short-term forecasts pertain to ongoing ____. Long-term forecasts are an important ___ planning tool.

Qualitative

Surveys Judgmental

1. Interative 2. Concensus

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

Predictor Variables

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

False

The expected level (value) of the forecasted quantity is the most important aspect of the forecast

1) Minimizes 2) Squared

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

1) Index 2) Multiplicative

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

False

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

Time-Ordered

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

Quantitative

Time-series Associative

Linear

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

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

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

MAPE is the average absolute percent error

What is the correct interpretation of MAPE?

1. The accuracy of the method 2. The ability of data 3. The type of data

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

1. A considerable amount of knowledge is required to correctly interpret the results for valid information 2. It is difficult to get a representative sample 3. Consumer opinion may be temporarily influenced by outside factors like sales pitches

Which of the following are disadvantages of consumer surveys?

1) Shorten the lead time of responding to forecasts. 2) Shorten the forecasting time horizon. 3) Increase the flexibility of operations. 4) Maintain accurate and up-to-date information.

Which of the following are ways to improve forecast accuracy?

Its use of cumulative errors

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

No patterns such as cycles or trends

Which of the following is an assumption regarding variations around the line for simple regression?

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 disadvantages of the weighted moving average forecast?

1. Naïve forecasts use a single previous value to forecast a future value 2. Naïve forecasts can be used with stable time series, with seasonal variations, or with trends 3. Naïve forecasts are easy to understand.

Which of the following statements about naive forecasting are true?

1. Use a naive forecast for F^2 to start off the forecast series 2. Use an average of several values to start off the initial forecast for the forecast series

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

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

Which of the following statements is correct?