Pumpkin Pies Galore is trying to forecast sales of pies for the month of Decembe
ID: 462717 • Letter: P
Question
Pumpkin Pies Galore is trying to forecast sales of pies for the month of December. Demand for pies in September, October, and November has been 286, 303, and 373, respectively. Edith, the company’s owner, uses a three-period weighted moving average to forecast sales. Based on her experience, she chooses to weight September as 0.1, October as 0.3, and November as 0.6. (Round your answers to 1 decimal place, the tolerance is +/-0.1.) What would Edith’s forecast for December be? Forecast using a weighted moving average = What would her forecast be using the naïve method? Forecast using the naïve approach = If actual sales for December turned out to be 430 pies, which method was better (use MAD)? Absolute deviation using a weighted moving average = Absolute deviation using naïve method = . (For computation use only December data.) The approach is better.
Explanation / Answer
1. 3 period weighted moving average for December = [(weight of september*september demand)+(weight of october*october demand)+(weight of november*november demand)]/sum of the weights
Thus forecast for december = 343.3/1 = 343.3
2. Naive forecasting says that foreacst for next month will be the demand that was last observed. In this case the last observed value was for November which was 373. Hence the forecast for December will be 373 as well.
3. MAD = absolute value of (december forecast - actual december value)
MAD in case of 3 period moving average = absolute value of (343.3 - 430)
= 86.7
MAD in case of naive method = absolute value of (373 - 430)
= 57.
MAD is lower for naive method and so naive method is a better approach in this case.
Month Weight Demand weight *demand September 0.1 286 28.6 October 0.3 303 90.9 November 0.6 373 223.8 Total 1 343.3Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.