Question

Suppose a company has the following sales for the last six months (January – June):

Month	Period	Sales
January	1	16
February	2	25
March	3	20
April	4	20
May	5	31
June	6	35
July	7	26
August	8	(a)

Use this information to answer the following 7 questions:

6.Using January through July values, develop a linear trend equation for this time series (to 4 decimals). Please write the equation in the proper form.

7.Using your answer from (7), what is the average change in sales per month for this company (to 2 decimals)?

I already have the answers to 1-5 I JUST NEED 6-7

1.Use exponential smoothing (a= 0.10) to forecast the sales for August (to 2 decimals). What is the value?

2. Compute the MSE for the exponential smoothing method from the above question (to 2 decimals).

3.Use a 2-period moving average to forecast the sales for August (to 2 decimals). (i.e.find (a) using a 2-period moving average)

4. What is the mean square error (MSE) for the 2-period moving average from the previous question?

5. Which method do you prefer to forecast sales (to 2 decimals)? Why?

ANSWERS FOR 1-5

1) and 2)

Forecast 21.01

MSE:81.83

3) and 4)

FORECAST IS 30.5

MSE 53.35

5)we prefer moving average as its MSE is lower

Answer 1

Solution 6

So, linear trend equation for this time series is as follows:

y = 16 + 2.1786*x

Solution 7

Average change in sales per month for this company = Slope of linear trend equation = Coefficient of x = 2.1786

Thus, the average change in sales per month for this company is 2.18