Question

The monthly sales for Yazici Batteries, Inc., were as follows:

MONTH	SALES
January	20
February	21
March	15
April	14
May	13
June	16
July	17
August	18
September	20
October	20
November	21
December	23

1. Plot the monthly sales data.

2. Forecast January sales using each of the following:

   1. Naive method.

   2. A 3-month moving average.

   3. A 6-month weighted average using .1, .1, .1, .2, .2, and .3, with the heaviest weights applied to the most recent months.

   4. Exponential smoothing using an α = .3 and a September forecast of 18.

   5. A trend projection.

3. With the data given, which method would allow you to forecast next March’s sales?

Please answer V. and C. at the bottom and show work Thank you

Answer 1

b)

1) Naive method: It is the forecast method to have previous period actual value

Jan forecast = Dec actual = 23

2) 3 month moving average = Average (Oct+Nov+Dec) = (20+21+23)/3 = 21.33

3) Weighted average = Jul*0.1 + Aug*0.1 + Sep*0.1 + Oct*0.2 + Nov*0.2 + Dec*0.3 = 0.1*17 + 0.1*18 + 0.1*20 + 0.2*20 + 0.2*21 + 0.3*23 = 20.60

4) Exponential:

Forecast (t+1) = Forecast (t) + alpha*(Actual(t) - Forecast(t))

Oct = 18 + 0.3*(20-18) = 18.6

Nov = 18.6 + 0.3*(20-18.6) = 19.02

Dec = 19.02 + 0.3*(21-19.02) = 19.61

Jan = 19.61 + 0.3*(23-19.61) = 20.63

c) I will prefer to use exponential smoothing as it helps to factor in the demand fluctuation to give more realistic estimate and minimum error