2 of 8 2. Sales of vacuum cleaners over the past 6 months are as follows: Month

Question

2 of 8 2. Sales of vacuum cleaners over the past 6 months are as follows: Month Sales (in $1,000s) August 14 September October 12 November 14 December 16 January 11 a) Develop a 2-month moving average to forecast month February. b) Develop a 3-month moving average to forecast month February. weight for the most recent past period, 2 for second most recent, and 1 for third most recent. d) Using exponential smoothing with a 0.4, develop forecast for February. e) Which method from part c and d) is best? Explain.

Explanation / Answer

2 a) as two month moving average foreacst =average of last 2 months actual

forecast for february =13.5

b)

c)

as weighted average =(3*last month actual+2*one month prior actual+1*two month prior actual)/(3+2+1)

hence

forecast for february =13.17

d)exponential forecast =alpha*last month actual+(1-alpha)*last month forecast

from above forecast for february =13.26

method in part c is better cause it gives less mean square error

two month moving average month sales Forecast August 14 September 17 October 12 15.5 November 14 14.5 December 16 13 January 11 15 February 13.5

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