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
a. Plot the monthly data on a sheet of graph paper.
b. 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 March forecast of 19(000).
(5) A linear trend equation.
c. Which method seems least appropriate? Why?
d. What does use of the term sales rather than demand presume?