Question

1. Use the following sales data to answer the questions.

Month                              Sales

January                              $250,000

February                            $200,000

March                               $300,000

April                                  $350,000

May                                   $450,000

1. Using a two month moving average, what are the expected sales for June?

2. Using a three month moving average, what are the expected sales for June?

2. Ed Rogers owns an appliance store. Sales data on a particular model of a DVD player for the past six months are shown below, along with the results of two different forecasting models:

Month	Sales	Forecast 1	Forecast 2
Jan	35	30	33
Feb	29	28	32
Mar	39	43	35
Apr	42	40	45
May	51	48	52
Jun	56	55	52

Which is the better forecasting model, based on the MAD criterion?

3. Ed Rogers owns an appliance store. Sales data on a particular model of a DVD player for the past six months are:

Month	Sales
Jan	35
Feb	29
Mar	39
Apr	42
May	51
Jun	56

Forecast sales for July using an exponential smoothing model with a smoothing constant of 0.40. Assume that the forecast for May was 36.25.

Answer 1

Qs 1)

a) A two period moving average method averages the actual value for the previous two periods to generate the forecast for the next period. This can be calculated as the sum of the actual value for the previous two periods/2

So using the above formula, expected sales for June = (350000+450000) / 2 = 800000/2 = 400000

b) A three period moving average method averages the actual value for the previous three periods to generate the forecast for the next period. This can be calculated as the sum of the actual value for the previous three periods/3

So using the above formula, expected sales for June = (300000+350000+450000) /3 = 1100000/3 = 366666.67