Linear Regression

PROBLEMS

Question 2. National Scan, Inc., sells radio frequency inventory tags. Monthly sales for a seven-month period were as follows:

Month Sales

(000 units)

Feb. 19

Mar. 18

Apr. 15

May 20

Jun. 18

Jul. 22

Aug. 20

Plot the monthly data on a sheet of graph paper.

Forecast September sales volume using each of the following:

(1) The naive approach

(2) A five-month moving average

(3) A weighted average using .60 for August, .30 for July, and .10 for June

(4) Exponential smoothing with a smoothing constant equal to .20, assuming a a March ­forecast of 19(000)

(5) A linear trend equation

Which method seems least appropriate? Why? (Hint: Refer to your plot from part a.)

What does use of the term sales rather than demand presume?

Question 3. A dry cleaner uses exponential smoothing to forecast equipment usage at its main plant. August usage was forecasted to be 88 percent of capacity; actual usage was 89.6 percent of capacity. A smoothing constant of .1 is used.

Prepare a forecast for September.

Assuming actual September usage of 92 percent, prepare a forecast for October usage.

Question 4. An electrical contractor’s records during the last five weeks indicate the number of job requests:

Week 1 2 3 4 5

Requests 20 22 18 21 22

Predict the number of requests for week 6 using each of these methods:

Naive

A four-period moving average

Exponential smoothing with α = .30; use 20 for week 2 forecast

Question 8. Air travel on Mountain Airlines for the past 18 weeks was:

Week Passengers

1 405

2 410

3 420

4 415

5 412

6 420

7 424

8 433

9 438

10 440

11 446

12 451

13 455

14 464

15 466

16 474

17 476

18 482

Explain why an averaging technique would not be appropriate for forecasting.

Use an appropriate technique to develop a forecast for the expected number of passengers for the next three weeks.