A ski repair shop at a resort in Colorado sells replacement poles each season. T

Question

A ski repair shop at a resort in Colorado sells replacement poles each season. The shop needs to develop a forecast of next season’s sales so that they can place an order for poles with their supplier well in advance of the beginning of the season. Sales data for the past five years are shown below.   Compare the forecasts given by the following models.

Year:                      1          2          3          4          5

Sales (units):          350      375      355      375      390

Develop forecasts using:

A 5 year moving average.

A weighted moving average model with weights of 0.2, 0.2, 0.1, 0.3, and 0.2 for years 1 through 5 respectively.

An exponential smoothing model with year 1 forecast of 380 and ?= 0.3.

Explanation / Answer

Year:                      1          2          3          4          5

Sales (units):          350      375      355      375      390

5 year moving average:- (350+375+355+375+390)/5 = 369

Weighted moving average= (350*0.2+375*0.2+355*0.1+375*0.3+390*0.2)= 371

Exponential smoothing model:-

F2 = 380+0.3(350-380)=371

F3=371+0.3(375-371)=372.2

F4=372.2+0.3(355-372.2)=367.04

F5=367.04+0.2(375-367.04)=368.63

F6= 368.63+0.2(390-368.63)=372.9

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