Question

The manager of a travel agency asked you to come up with a forecasting technique that will best fit to the actual demand for packaged tours. You have observed and recorded the actual demand for the last 10 periods. You also identified two possible techniques for consideration: 2-month moving averages (F1), and exponential smoothing (F2) with a smoothing constant of 0.40. Using Cumulathve Forecasting Erro (CFE) and Mean Absolute Daviation (MAD) as your performance measures you will detarmine tha technique that will best fit to the actual demand data provided in the following table STEP 1: Given start forecast values in period 3, compute forecast values from period 4 to 10. You are asked to provide the forecast values for period 6 and 10 for both techniques 2-Month MA Exponential F2 F1 PeriodDemand 135 199 106 160 73 139 144 122 78 122 167 128 10 STEP 2: Using data from period 3 to period 10 Provide the performance measures for F1 tachnique MAD CFE- Provide the performance measures for F2 technique: MAD CFE Based on these measures, which tachnique best fit to your data? (Enter F1 or F2) NOTE: All computed forecast values should be rounded to the nearest integer (no decinal, for example 190) Performance measures (CFE and MAD) must be rounded to the nearest hundredth (two decimals after the dot, for example 30.99).

Answer 1

The magnitude of CFE and MAD is lesser for F2(Exponential)

Therefore, the best fit is F2