The following table shows the actual demand observed over the last 11 years: Yea

Question

The following table shows the actual demand observed over the last 11 years: Year 1 2 356 78 91011 8 491 7 13 12 10 11 7 Demand6 This exercise contains only parts b, c, and d b) Using the 3-year moving average, provide the forecast from periods 4 through 12 (round your responses to one decimal place). Year 4 5 67891011 12 ForecastLELUEILELEIN c) Using the 3-year weighted moving average with weights 0.10, 0.30, and 0.60, using 0.60 for the most recent period, provide the forecast from periods 4 through 12 (round your responses to two decimal places). Year 5 6789 0 Forecast 12 d) Mean absolute deviation for the forecast developed using the 3-year moving average is 2.39 and for the 3-year weighted moving average is 2.65. Based on this information, the better forecast is achieved using the approach.

Explanation / Answer

b) 3-year moving average forecast

F4 = (6+8+4)/3 = 6

F5 = (8+4+9)/3 = 7

F6 = (4+9+11)/3 = 8

F7 = (9+11+7)/3 = 9

F8 = (11+7+13)/3 = 10.3

F9 = (7+13+12)/3 = 10.7

F10 =(13+12+10)/3 = 11.7

F11 = (12+10+11)/3 = 11

c) 3-year weighted moving average

F4 = (0.6*3+0.3*8+0.1*6) = 4.8

F5= (0.6*9+0.3*4+0.1*8) = 7.4

F6 = (0.6*11+0.3*9+0.1*4) = 9.7

F7 = (0.6*7+0.3*11+0.1*9) = 8.4

F8 = (0.6*13+0.3*7+0.1*11) = 11

F9 = (0.6*12+0.3*13+0.1*7) = 11.8

F10 = (0.6*10+0.3*12+0.1*13) = 10.9

F11 = (0.6*11+0.3*10+0.1*12) = 10.8

F12= (0.6*7+0.3*11+0.1*10) = 8.5

d) As MAD for 3-year moving average is less compared to that of 3-year weighted moving average, the better forecast is 3-year moving average approach.

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