Problem 1 The U.S. Census Bureau publishes data on factory orders for all manufa

Question

Problem 1
The U.S. Census Bureau publishes data on factory orders for all manufacturing, durable goods, and nondurable goods industries. Shown here are factory orders in the United States from 1987 through 1999 ($ billion).
(a) Use these data to develop forecasts for the years 1992 through 1999 using a 5-year moving average.
(b) Use these data to develop forecasts for the years 1992 through 1999 using a 5-year weighted moving average. Weight the most recent year by 6, the previous year by 4, the year before that by 2, and the other years by 1.
(c) Which method is more suitable for forecasting factory orders? Hint: Compare the two methods based on Mean Absolute Deviation (MAD)?

Year Factory Orders ($ billion)
1987 2,512.7
1988 2,739.2
1989 2,874.9
1990 2,934.1
1991 2,865.7
1992 2,978.5
1993 3,092.4
1994 3,356.8
1995 3,607.6
1996 3,749.3
1997 3,952.0
1998 3,949.0
1999 4,137.0

Explanation / Answer

(A) average previous 5 years to get the forecast. I used excel to get: 2,785.32 2,878.48 2,949.12 3,045.50 3,180.20 3,356.92 3,551.62 3,722.94 (B) add up prev year*6+year before *4 + year before that*2+ last two years to get: 2,852.31 2,915.44 3,000.63 3,161.94 3,364.41 3,550.76 3,740.97 3,854.64 (c)The MAD of (a) is 419.0625 The MAD of (b) is 297.6866071 Therefore the weighted average is better for this forcasting because the deviation from actual results is smaller.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.