Question

Consider a Simple Moving Average or a Weighted Moving Average.  Which of the following statements is NOT correct?

A. The weighted moving average is a more powerful method than the simple moving average because of the ability to vary the weights.

B. The weights in a weighted moving average model can be chosen based on past demand data

C. If the actual demand data has a trend, the weighted moving average can better capture the trend, while the simple moving average will not be able to capture the trend

D. A simple moving average is the same as a weighted moving average where all the weights are equa

E. All of the above

Answer 1

Answer 1) Option D is not correct that is “A simple moving average is the same as a weighted moving average where all the weights are equal”

In simple moving average the sum of whole data is taken and then the data is processed whereas in weighted moving average data is calculated by multiplying each observation of individual data set by predetermined weighting factor. For example

Unit Output

20    200

25   250

30   300

35   350

______

110 1100

This single calculation is simple moving average system

Unit Output WA

20    200   4000

25   250    6250

30   300   9000

35   350   10500

____________

110 1100 297500

This is calculation of weighted average.

In both the systems the weights that are used are different.