Sales of industrial vacuum cleaners at R. Lowenthal Supply Co. over the past 13
ID: 3303463 • Letter: S
Question
Sales of industrial vacuum cleaners at R. Lowenthal Supply Co. over the past 13 months are as follows:
Sales ($1000’s)
Month
11
January
14
February
16
March
10
April
15
May
17
June
11
July
14
August
17
September
12
October
14
November
16
December
11
January
a) Using a moving average with three periods, determine the demand for vacuum cleans for next February
b) Using a weighted moving average with three periods, determine the demand for vacuum cleaners for February. Use 3, 2, and 1 for the weights of the most recent, second most recent, and third most recent periods respectively. For example, if you were forecasting the demand for February, November would have a weight of 1, December would have a weight of 2, and January would have a weight of 3.
c) Evaluate the accuracy of each of these methods.
d) What other factors might R. Lowenthal consider in forecasting sales?
*Sufficient detail should be included to show the major steps in the decision making process:
Sales ($1000’s)
Month
11
January
14
February
16
March
10
April
15
May
17
June
11
July
14
August
17
September
12
October
14
November
16
December
11
January
Explanation / Answer
Solution:
a) Using the moving average of 3 periods, the demand for vaccum cleaners for next February is,
Demand for February = (sales January+ Sales December+ Sales November)/3
= (11+16+14)/3 = 13.67(in 1000's)
b) Using weighted moving average with 3 periods, the demand for vaccum cleaners for February is,
Weighted Moving Average = 3 * Sales January +2 * Sales December +1 * Sales November
= 3(11)+ 2(16) + 1(14)
= 79(in 1000's)
c) The average sales are 13,69
The mean absolute deviation for moving average value is,
MAD = [13.69 - 13.67] = 0.02 (in 1000's)
The mean absolute deviation for weighted moving average value is,
MAD = [79-13.69] = 65.3(in 1000's)
The moving average is better method since its MAD is less.
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