Homework

1. Sales of quilt covers at Bud Banis’ department store in Carbondale over the past year are shown below. Management prepared a forecast using a combination of exponential smoothing and its collective judgment for the 4 months (March, April, May, and June):

MONTH	UNIT SALES	MANAGEMENT’S FORECAST
July	100
August	93
September	96
October	110
November	124
December	119
January	92
February	83
March	101	120
April	96	114
May	89	110
June	108	108

a. Compute MAD and MAPE for management’s technique.

b. Do management’s results outperform (i.e., have smaller MAD and MAPE than) a naive forecast?

c. Which forecast do you recommend, based on lower forecast error? PX

2. Attendance at Orlando’s newest Disney like attraction, Lego World, has been as follows:

QUARTER	GUESTS (IN THOUSANDS)	QUARTER	GUESTS (IN THOUSANDS)
Winter Year 1	73	Summer Year 2	124
Spring Year 1	104	Fall Year 2	52
Summer Year 1	168	Winter Year 3	89
Fall Year 1	74	Spring Year 3	146
Winter Year 2	65	Summer Year 3	205
Spring Year 2	82	Fall Year 3	98

Compute seasonal indices using all of the data. PX

3. Storrs Cycles has just started selling the new Cyclone Mountain bike, with monthly sales as shown in the table. First, co-owner Bob Day wants to forecast by exponential smoothing by initially setting February’s forecast equal to January’s sales with α=.1. Co-owner Sherry Snyder wants to use a three-period moving average.

	SALES	BOB	SHERRY	BOB’S ERROR	SHERRY’S ERROR
January	400	—
February	380	400
March	410
April	375
May

a. Is there a strong linear trend in sales over time?

b. Fill in the table with what Bob and Sherry each forecast for May and the earlier months, as relevant.

c. Assume that May’s actual sales figure turns out to be 405. Complete the table’s columns and then calculate the mean absolute deviation for both Bob’s and Sherry’s methods.

d. Based on these calculations, which method seems more accurate? PX