Question

The following data show the average prices for a​ 32-inch LCD television over a​ six-year period based on​ fourth-quarter results. Complete parts a through e below.

Year	2005	2006	2007	2008	2009	2010
Price	$1,529	$864	$732	$597	$501	$379

​a)	Forecast the average price of a​ 32-inch LCD television during the fourth quarter of 2011 using a​ two-period simple moving average. ​b) Calculate the MAD for the forecast in part a.
​c)	Forecast the average price of a​ 32-inch LCD television during the fourth quarter of 2011 using a​ three-period simple moving average. d) Calculate the MAD for the forecast in part c. e) Which forecast would you​ choose?

Answer 1

a)

Year	Price(A)	forecast(F)	|A-F|
2005	1,529
2006	864
2007	732	1,196.50	464.50
2008	597	798.00	201.00
2009	501	664.50	163.50
2010	379	549.00	170.00
		average	249.75

forecast =(501+379)/2 =440.00

b)MAD =249.75

c)

Year	Price(A)	forecast(F)	|A-F|
2005	1,529
2006	864
2007	732
2008	597	1,041.67	444.67
2009	501	731.00	230.00
2010	379	610.00	231.00
		average	301.89

forecast =(597+501+379)/3=492.33

d)MAD =301.89

e) two-period simple moving average due to smaller MAD