Question

The demand for a product in each of the last five months is shown below.

Month                  1   2    3   4 5

Demand ('00s)   13 17 19   23   24

a. Use a three month moving average to generate a forecast for demand in month 6.

b. What are the four components of time series analysis which needs to be first evaluated, extracted and interpreted so as to make it understandable

Answer 1

For three month moving average we use last 3 months data for average =( 24+23+19)/3=66/3= 22

Thus in 6th month the 3 month moving average is 22 units.

The four components of time series analysis are:

1. Seasonal variations which show repetitiveness over specific period
2. Trend variations which shall move up across and down based on reasonal performance pattern
3. Cyclical change like boom bust cycles
4. Random variations which have no correlation whatsoever to above three components