Chapter 5 Forecasting

41) A medium-term forecast is considered to cover what length of time?

A) 2-4 weeks

B) 1 month to 1 year

C) 2-4 years

D) 5-10 years

E) 20 years

42) When is the exponential smoothing model equivalent to the naïve forecasting model?

A) ? = 0

B) ? = 0.5

C) ? = 1

D) during the first period in which it is used

E) never

43) Enrollment in a particular class for the last four semesters has been 120, 126, 110, and 130. Suppose a one-semester moving average was used to forecast enrollment (this is sometimes referred to as a naïve forecast). Thus, the forecast for the second semester would be 120, for the third semester it would be 126, and for the last semester it would be 110. What would the MSE be for this situation?

A) 196.00

B) 230.67

C) 100.00

D) 42.00

E) None of the above

44) Which of the following methods tells whether the forecast tends to be too high or too low?

A) MAD

B) MSE

C) MAPE

D) decomposition

E) bias

45) Assume that you have tried three different forecasting models. For the first, the MAD = 2.5, for the second, the MSE = 10.5, and for the third, the MAPE = 2.7. We can then say:

A) the third method is the best.

B) the second method is the best.

C) methods one and three are preferable to method two.

D) method two is least preferred.

E) None of the above

46) Which of the following methods gives an indication of the percentage of forecast error?

A) MAD

B) MSE

C) MAPE

D) decomposition

E) bias

47) Daily demand for newspapers for the last 10 days has been as follows: 12, 13, 16, 15, 12, 18, 14, 12, 13, 15 (listed from oldest to most recent). Forecast sales for the next day using a two-day moving average.

A) 14

B) 13

C) 15

D) 28

E) 12.5

48) As one increases the number of periods used in the calculation of a moving average,

A) greater emphasis is placed on more recent data.

B) less emphasis is placed on more recent data.

C) the emphasis placed on more recent data remains the same.

D) it requires a computer to automate the calculations.

E) one is usually looking for a long-term prediction.

49) Enrollment in a particular class for the last four semesters has been 122, 128, 100, and 155 (listed from oldest to most recent). The best forecast of enrollment next semester, based on a three-semester moving average, would be

A) 116.7.

B) 126.3.

C) 168.3.

D) 135.0.

E) 127.7.

50) Which of the following methods produces a particularly stiff penalty in periods with large forecast errors?

A) MAD

B) MSE

C) MAPE

D) decomposition

E) bias

51) The process of isolating linear trend and seasonal factors to develop more accurate forecasts is called

A) regression.

B) decomposition.

C) smoothing.

D) monitoring.

E) None of the above

52) Sales for boxes of Girl Scout cookies over a 4-month period were forecasted as follows: 100, 120, 115, and 123. The actual results over the 4-month period were as follows: 110, 114, 119, 115. What was the MAD of the 4-month forecast?

A) 0

B) 5

C) 7

D) 108

E) None of the above

53) Sales for boxes of Girl Scout cookies over a 4-month period were forecasted as follows: 100, 120, 115, and 123. The actual results over the 4-month period were as follows: 110, 114, 119, 115. What was the MSE of the 4-month forecast?

A) 0

B) 5

C) 7

D) 108

E) None of the above

54) Daily demand for newspapers for the last 10 days has been as follows: 12, 13, 16, 15, 12, 18, 14, 12, 13, 15 (listed from oldest to most recent). Forecast sales for the next day using a three-day weighted moving average where the weights are 3, 1, and 1 (the highest weight is for the most recent number).

A) 12.8

B) 13.0

C) 70.0

D) 14.0

E) None of the above

55) Daily demand for newspapers for the last 10 days has been as follows: 12, 13, 16, 15, 12, 18, 14, 12, 13, 15 (listed from oldest to most recent). Forecast sales for the next day using a two-day weighted moving average where the weights are 3 and 1.

A) 14.5

B) 13.5

C) 14

D) 12.25

E) 12.75

56) Which of the following is not considered to be one of the components of a time series?

A) trend

B) seasonality

C) variance

D) cycles

E) random variations

57) Which of the following statements about the decomposition method is/are false?

A) The process of "deseasonalizing" involves multiplying by a seasonal index.

B) Dummy variables are used in a regression model as part of an additive approach to seasonality.

C) Computing seasonal indices is the first step of the decomposition method.

D) Data is "deseasonalized" after the trend line is found.

E) Decomposition can involve additive or multiplicative methods with respect to seasonality.

58) Enrollment in a particular class for the last four semesters has been 120, 126, 110, and 130 (listed from oldest to most recent). Develop a forecast of enrollment next semester using exponential smoothing with an alpha = 0.2. Assume that an initial forecast for the first semester was 120 (so the forecast and the actual were the same).

A) 118.96

B) 121.17

C) 130

D) 120

E) None of the above

59) Demand for soccer balls at a new sporting goods store is forecasted using the following regression equation:

Y = 98 + 2.2X where X is the number of months that the store has been in existence. Let April be represented by

X = 4. April is assumed to have a seasonality index of 1.15. What is the forecast for soccer ball demand for the month of April (rounded to the nearest integer)?

A) 123

B) 107

C) 100

D) 115

E) None of the above

60) A TIME SERIES forecasting model in which the forecast for the next period is the actual value for the current period is the

A) Delphi model.

B) Holt's model.

C) naïve model.

D) exponential smoothing model.

E) weighted moving average.

61) In picking the smoothing constant for an exponential smoothing model, we should look for a value that

A) produces a nice-looking curve.

B) equals the utility level that matches with our degree of risk aversion.

C) produces values which compare well with actual values based on a standard measure of error.

D) causes the least computational effort.

E) None of the above

62) Which of the following is not considered one of the steps to developing the decomposition method?

A) compute seasonal indices using CMAs

B) deseasonalize the data by dividing each number by its seasonal index

C) find the equation of the trend line using the deseasonlized data

D) forecast for future periods using the trend line

E) add the seasonal index to the trend forecast

63) A method to measure how well predictions fit actual data is

A) decomposition

B) smoothing

C) tracking signal

D) regression

E) moving average

64) If the Q1 demand for a particular year is 200 and the seasonal index is 0.85, what is the deseasonalized demand value for Q1?

A) 170

B) 185

C) 215

D) 235.29

E) 250

65) In the exponential smoothing with trend adjustment forecasting method, ? is the

A) slope of the trend line.

B) new forecast.

C) Y-axis intercept.

D) independent variable.

E) trend smoothing constant.

66) Using the additive decomposition model, what would be the period 2, Q3 forecast using the following equation: = 20 + 3.2X1+ 1.5X2 + 0.8X3 + 0.6X4?

A) 23.2

B) 25

C) 27

D) 27.2

E) 27.9

67) The computer monitoring of tracking signals and self-adjustment is referred to as

A) exponential smoothing.

B) adaptive smoothing.

C) trend projections.

D) trend smoothing.

E) running sum of forecast errors (RFSE).

68) Which of the following is not a characteristic of trend projections?

A) The variable being predicted is the Y variable.

B) Time is the X variable.

C) It is useful for predicting the value of one variable based on time trend.

D) A negative intercept term always implies that the dependent variable is decreasing over time.

E) They are often developed using linear regression.

69) A tracking signal was calculated for a particular set of demand forecasts. This tracking signal was positive. This would indicate that

A) demand is greater than the forecast.

B) demand is less than the forecast.

C) demand is equal to the forecast.

D) the MAD is negative.

E) None of the above

70) A seasonal index of ________ indicates that the season is average.

A) 10

B) 100

C) 0.5

D) 0

E) 1

71) The errors in a particular forecast are as follows: 4, -3, 2, 5, -1. What is the tracking signal of the forecast?

A) 0.4286

B) 2.3333

C) 5

D) 1.4

E) 2.5

72) Demand for a particular type of battery fluctuates from one week to the next. A study of the last six weeks provides the following demands (in dozens): 4, 5, 3, 2, 8, 10 (last week).

(a) Forecast demand for the next week using a two-week moving average.

(b) Forecast demand for the next week using a three-week moving average.

73) Daily high temperatures in the city of Houston for the last week have been: 93, 94, 93, 95, 92, 86, 98 (yesterday).

(a) Forecast the high temperature today using a three-day moving average.

(b) Forecast the high temperature today using a two-day moving average.

(c) Calculate the mean absolute deviation based on a two-day moving average, covering all days in which you can have a forecast and an actual temperature.

74) For the data below:

Month	Automobile Battery Sales	Month	Automobile Battery Sales
January	20	July	17
February	21	August	18
March	15	September	20
April	14	October	20
May	13	November	21
June	16	December	23

(a) Develop a scatter diagram.

(b) Develop a three-month moving average.

(c) Compute MAD.

75) For the data below:

Month	Automobile Tire Sales	Month	Automobile Tire Sales
January	80	July	68
February	84	August	100
March	60	September	80
April	56	October	80
May	52	November	84
June	64	December	92

(a) Develop a scatter diagram.

(b) Compute a three-month moving average.

(c) Compute the MSE.

76) For the data below:

Year	Automobile Sales	Year	Automobile Sales
1990	116	1997	119
1991	105	1998	34
1992	29	1999	34
1993	59	2000	48
1994	108	2001	53
1995	94	2002	65
1996	27	2003	111

(a) Develop a scatter diagram.

(b) Develop a six-year moving average forecast.

(c) Find MAPE.

77) Use simple exponential smoothing with ? = 0.3 to forecast battery sales for February through May. Assume that the forecast for January was for 22 batteries.

Month	Automobile Battery Sales
January	42
February	33
March	28
April	59

78) Average starting salaries for students using a placement service at a university have been steadily increasing. A study of the last four graduating classes indicates the following average salaries: $30,000, $32,000, $34,500, and $36,000 (last graduating class). Predict the starting salary for the next graduating class using a simple exponential smoothing model with ? = 0.25. Assume that the initial forecast was $30,000 (so that the forecast and the actual were the same).

79) Use simple exponential smoothing with ? = 0.33 to forecast the tire sales for February through May. Assume that the forecast for January was for 22 sets of tires.

Month	Automobile Battery Sales
January	28
February	21
March	39
April	34

80) The following table represents the new members that have been acquired by a fitness center.

Month	New members
Jan	45
Feb	60
March	57
April	65

Assuming ? = 0.3, ? = 0.4, an initial forecast of 40 for January, and an initial trend adjustment of 0 for January, use exponential smoothing with trend adjustment to come up with a forecast for May on new members.