1. Your manager asks you to forecast demand for a popular product ABC in your firm. She has provided you with the following historical demand data for the first six months in 2018 (Assume that you are at the end of June 2018) and would like you to answer her questions below.
Month Actual demand
January 54
February 56
March 60
April 68
May 66
June 73
a. Calculate the one-step-ahead simple two-month moving average forecasts for March through July 2018 and the mean absolute deviation (MAD) of this forecasting approach.
b. Calculate the one-step-ahead weighted two-month moving average forecasts for March through July 2018 using weights 1 0.75 (current period), 0.25 (one period older). w w t t = − = What is the MAD of this method?
c. Calculate the one-step-ahead forecasts for February through July 2018 using exponential smoothing with a smoothing constant α = 0.12 and a forecast for January 2018 of 54. What is the MAD of this forecasting method?
d. What are the two-step-ahead forecasts for August 2018 based on the aforesaid three methods, respectively?
e. Which of the aforesaid approaches has the most preferred MAD?
f. Calculate the one-step-ahead forecast for July 2018 and twostep-ahead forecast for August 2018 using the adjusted exponential smoothing method with F1 = 54, T1 = 0, and a. α = β = 0.20. Calculate its MAD.
g. the optimal α and β minimizing MAD. Calculate its MAD.