A retailer sells personal computers. The monthly sales for the first 5 months ar
ID: 464019 • Letter: A
Question
A retailer sells personal computers. The monthly sales for the first 5 months are summarized as follows:
Month
Actual Sales
January
200
February
180
March
160
April
180
May
220
Compute the sales forecast for June using the 3-month moving average method. Please include at least one step of calculation and the correct answer for full credit. (4 points)
(b) Compute the sales forecast for June using the weighted 3-month moving average method. Assume that the respective importance weights are 0.20 for the sales in March, 0.30 for April, and 0.50 for May. Please include at least one step of calculation and the correct answer for full credit. (4 points)
(c) Suppose the forecast for May was 200 units. Using a smoothing constant = 0.2, compute the sales forecast for June. Please at least one step of calculation and the correct answer for full credit. (4 points)
Month
Actual Sales
January
200
February
180
March
160
April
180
May
220
Explanation / Answer
a)
Under the three-month moving average method, the actual results of past three months are added together and an average of these is calculated by dividing with three to arrive at the forecast for next period.
= Sum of actual sales of March, April and May / 3
= (160+180+220) / 3
= 186.67
b)
As per weighted 3 month moving average method, the actual results of respective months are multiplied by their respective weights and the sum total of these is the weighted moving average forecast.
= Weight of March x Actual of march + Weight of April x Actual of April + Weight of May x Actual of May
= 0.20 x 160 + 0.30 x 180 + 0.50 x 220
= 196
c)
Forecast as per exponential smoothing:
This can be written as:
St+1=St+t,
where t is the forecast error (actual - forecast) for period t.
In other words, the new forecast is the old one plus an adjustment for the error that occurred in the last forecast.
Forecast for June = Forecast for May + (Actual of May - Forecast of May) x a
= 200 + (220 - 200) x 0.20
= 204
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