BUSMGT 3230 Forecasting

One MAD is approximately how many standard deviations?

0.8

Which of the following is the formula for a simple moving average?

Ft=At−1+At−2+At−3+...+At−n/n

Which of the following is the formula for a single exponential smoothing?

Ft=Ft-1+α(At−1−Ft−1)

Which of the following is the formula for a weighted moving average?

Ft=w1At-1+w2At-2+...+wnAt-n

Adjusting the value of alpha to more closely track actual demand is called __________ forecasting.

adaptive

The two types of seasonal variation discussed are __________ and ____________

additive multiplicative

The main disadvantage of the moving average is that

all individual data elements must be carried as data.

The single exponential smoothing equation states that the _____________ forecast is equal to the ____________ forecast plus a portion of the __________________ .

new old error

In time series analysis, ____________ demand is used to predict __________ demand.

past; future

In the exponential smoothing forecast, At-1 represents

the actual demand in the prior period

In general, the longer the averaging period

the smoother the plot.

Long-term forecasting models detect general trends and are especially useful in identifying major __________ __________

turning points

When deciding which forecasting model to use, a firm should consider all of the following except:

weather

Which type of seasonal variation assumes that the season amount is a constant?

Additive

One standard deviation is approximately how many MADs?

1.25

Which of the following equations calculates the MAPE?

100n[Σ||At−Ft||At]

If a firm produced a product where they were expecting growth, what alpha value would you expect them to use?

15 to 30

When summing up the forecasts errors, the value used for ||18−20|| in the calculation is

2

In the exponential smoothing method, how many pieces of information are needed to forecast the future?

3

If a firm produced a standard item with relatively stable demand, what alpha value would you expect them to use?

5 or 10

With exponential smoothing, which smoothing constant controls the speed of reaction to differences between forecasts and actual demand?

Alpha

In most cases, demand for products or services can be broken down into six components: average demand for the period, a trend, seasonal element, cyclical elements, random variation, and autocorrelation. Match these six components with their definitions.

Average demand - This is the sum of the demand values divided by the sample size. This is the sum of the demand values divided by the sample size. Trend - This is a straight line fitted to the data. Seasonal element - This is period-by-period variations in demand. Cyclical elements - These are more difficult to determine because the time span may be unknown or the cause of the cycle may not be considered. Random - These are caused by chance events. Autocorrelation - This denotes the persistence of occurrence. More specifically, the value expected at any point is highly related with its own past values.

Which of the following should be considered when choosing a forecasting model? Check all that apply.

Consequence of a bad forecast Firm's degree of flexibility

Match these terms in the single exponential smoothing equation with their meanings.

Ft = The exponentially smoothed forecast for period t Ft-1 = The exponentially smoothed forecast made for the prior period At-1 = The actual demand in the prior period a = The desired response rate, or smoothing constant

Which of the following is not a forecast horizon used in forecasting?

Current

What term refers to repetitive activity that happens in other than annual recurrent periods?

Cyclical

______ factors are more difficult to determine because the time span may be unknown or the cause of the cycle may not be considered.

Cyclical

What term describes when you identify and separate time series data into components?

Decomposition

_________ of a time series means identifying and separating the time series data into various components.

Decomposition

With weighted moving averages, how are the weights selected? Check all that apply.

Experience Trial and error

When the most recent occurrences are more indicative of the future than those in the distant past, one should use which time series model?

Exponential

_______ ___________ is the most used of all forecasting techniques.

Exponential Smoothing

Match these terms used in the weighted moving average equation with their meaning.

Ft = Forecast for the coming period n = Total number of prior periods in the forecast At-1 = Actual occurrence in the past period w1 = Weight to be given to the actual occurrence for the period t − 1 w2 = Weight to be given to the actual occurrence for the period t − 2 wn = Weight to be given to the actual occurrence for the period t − n

Which measure of error calculates the average absolute value of the actual forecast error?

MAD

Which measurement of error is calculated by dividing the sum of the absolute forecast errors by the number of periods?

MAD

Which measurement of error represent the average error measured as a percentage of average demand?

MAPE

Which measurement of error measures the dispersion of some observed value from some expected value?

Mean absolute deviation

In business forecasting, what time frame usually refers to three months to two years?

Medium

___________-_______________ forecasts are useful for capturing seasonal effects.

Medium Term

When demand for a product is neither growing nor declining rapidly, and if it does not have seasonal characteristics, a __________ _____________ can be useful in removing the random fluctuations for forecasting.

Moving Average

Which of the following is not a component of demand?

Planned

What type of forecast should be used for strategy, sourcing and location decisions?

Strategic

Identify the basic classifications of forecasting.

Qualitative Casual relationships Time series analysis Simulation

Match these forecasting types with their descriptions.

Qualitative - Techniques that use managerial judgment. Time series analysis - Based on the idea that data relating to past demand can be used to predict future demand. Causal forecasting - Assumes that demand is related to some underlying factor or factors in the environment. Simulation - These models allow the forecaster to run through a range of assumptions about the condition of the forecast.

A moving average can be useful in removing what for forecasting.

Random fluctuations

In statistics, the difference between what actually occurred and what was forecast is referred to as what?

Residuals

Usually, which word is associated with a period of the year characterized by some activity?

Seasonal

A time series can be defined as chronologically ordered data that may contain one or more components of demand. What are these components?

Seasonal Autocorrelation Cyclical Trend Random

_____________-_______________ models are especially good for measuring the current variability in demand.

Short Term

Which forecasting model is base upon merely average past demand?

Simple moving average

Match these forecasting methods with the amount of historical data they require.

Simple moving average - 6 to 12 months; weekly data are often used Weighted moving average and simple exponential smoothing + exponential smoothing with trend - 5 to 10 observations needed to start Linear regression - 10 to 20 observations Trend and seasonal models - 2 to 3 observations per season

Which is the larger measure, the standard deviation or MAD?

Standard deviation

All of the following are reasons why exponential has become well accepted except:

Tests for accuracy are difficult

The weighted moving average requires what of the weights?

That they sum to one.

With exponential smoothing, the value for the constant is determined both by what? Check all that apply.

The nature of the product Manager's sense of what constitutes a good response rate

Exponential smoothing forecasting models are surprisingly _______

accurate

In the formula for exponential smoothing α(At-1-Ft-1) represents

a portion of the error

With_____ the value expected at any point is highly correlated with its own past values.

autocorrelation

With a simple moving average, the idea is to simply calculate the ______________ demand over the most recent periods.

average

Formulating an exponential smoothing forecasting model is relatively _______________

easy, simple, or effortless

A simple moving average gives _____________ weight to each component of the forecast; whereas a weighted moving average gives ___________ weight to each element

equal; varying

All forecasts certainly contain some

error or forecast error

The difference between the actual demand and the forecast is referred to as

forecast error.

When choosing weights for a weighted moving average, the general rule states that the most recent periods should get the _____ weighting

highest

Single exponential smoothing has the shortcoming of ___________ changes in demand.

lagging

When the data is ________ the most recent past is not the most important indicator of what to expect in the future and is not given the higher weighting.

seasonal

Tactical forecasts are _________ term, while strategic forecasts are _____________ term.

short; medium and long

The exponential smoothing forecasting model uses the following data, except:

smoothing constant delta

You generally use medium-term forecasts for planning a ______ for meeting demand over the next six months to a year and a half.

strategy

Match the following terms used in the MAD equation with their meaning.

t = Period number At = Actual demand for the period t Ft = Forecast demand for the period t n = total number of periods || = A symbol used to indicate the absolute value disregarding positive and negative signs

Match the following terms used in the MAPE equation with their meaning.

t = period number At = actual demand for period t Ft = forecast demand for the period t n = total number of periods || = A symbol used to indicate the absolute value disregarding positive and negative signs

You generally use short-term forecasts for _________ decisions such as replenishing inventory or scheduling employees in the near term.

tactical

Which of the following equations calculates the MAD?

Σ||At−Ft|/n

In calculating the MAPE, which of the following terms is not used?

α