Select Your Answer (B): Moving averge or exponential smoothing 240 350 230 260 2

Question

Select Your Answer (B): Moving averge or exponential smoothing

240 350 230 260 280 320 220 310 240 310 240 230 (a) Choose the correct time series plot. Month 4 (iv) 12345910 -Select your answer-y ! What type of pattern exists in the data? -Select your answer- (b) Compare a three-month moving average forecast with an exponential smoothing forecast for a0.2. Which provides the better forecasts based on MSE? Do not round your interim computations and round your final answers to two decimal places Moving Average Exponential smoothing MSE - Select your answer (c) What is the forecast for the next month using exponential smoothing with a = 0.2? If required, round your answer to two decimal places.

Explanation / Answer

(a) The correct time series plot is in option (i)

The data appears to have a horizontal pattern.

(b) The 3-month Moving Average forecast is given below:

The exponential smoothing forecast is given below:

The 3-period moving average provides a better forecast based on MSE.

(c) Forecast for the next month = 0.2 x 230 + 0.8 x 267.53 = 260.02

3-MA Forecast Error Error Squared 240 350 230 260 273.33 -13.33                177.78 280 280.00 0.00                         -   320 256.67 63.33            4,011.11 220 286.67 -66.67            4,444.44 310 273.33 36.67            1,344.44 240 283.33 -43.33            1,877.78 310 256.67 53.33            2,844.44 240 286.67 -46.67            2,177.78 230 263.33 -33.33            1,111.11 Sum          17,988.89 MSE            1,998.77

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