Question

2-E5. You are reviewing sales figures and are particularly interested in four salespersons: Fred, Ann, Jim and Jane. The figures you have are sales figures for 2001-2003 (in units of $1000). In addition, you have average sales across the whole workforce for each year as well as standard deviation. Note that the mean and standard deviation are for the whole workforce, not for Fred, Anne, Jim and Jane. They may be relevant for comparing the performance of each salesperson against the total sales force, for each year. 2001 2002 2003 Fred $282 $212 $271 Ann $246 $306 $225 Jim $335 $315 $227 Jane $366 $248 $288 Mean $295 $175 $255 Stdev $51 $13 $32 On the basis of their historical performance, how would you rank the four salespersons? There is not a single correct answer to this question.

Answer 1

Answer:

There are three methods mentioned in the question to be used for forecasting:

1. 3-month moving average method-- In this method, average of the immediate three preceeding months is used as the forecast for the current month, for example forecast for January is average of December, November, and October.

2. 3- months weighted average--- the formula used is Sigma WiAi where Wi is weight for ith month having Actual data as Ai., for example for January forecast = .2*October + .3*November + .5*December

3. An exponential smoothing forecasting method with $\alpha$=.2---- formula to be used Ft = $\alpha$At-1 + (1-$\alpha$)Ft-1 where Ft is forecast for time t and At-1 is actual for time t-1

Calculations with the given data are as follows:

		Forecasts
Month	Sales	3monthMA	Wt.Average	Exp.Smth.
January	35645			35000
Febuary	35456			35129
March	31270			35194.4
April	32139	34123.66667	33400.8	34409.52
May	34456	32955	32541.7	33955.416
June	35256	32621.66667	33123.7	34055.533
July	36218	33950.33333	34392.6	34295.626
August	35456	35310	35577	34680.101
September	34250	35643.33333	35644.6	34835.281
October	32156	35308	35005.4	34718.225
November	30123	33954	33444.2	34205.78
December	32275	32176.33333	31558.3	33389.224
January		31518	31605.6	33166.379