Sally, the manager of a clothing company needs to forecast the demand for an expensive type of cloth. Sue collected the demand data for the past eight months in 1000s of yards (see table below). All your answers should be in 1000s of yards as well. NOTE: For Questions 4 through 9, base your answers on the three month moving average forecasts.
THIS IS THE DATA TABLE
Month Demand (1000s yards) January -8 ,February -12, March -7, April- 9, May -15 ,June -11, July -10, August -12
The Sigma (or standard deviation) of the errors is:
If we assume that the errors follow a normal distribution, and we use 3-Sigma control limits to monitor the errors, then we can say:
If the exponential smoothing technique was used, with alpha = 0.3 and an initial February forecast of 8, then the September forecast is:
If we fit a trend line to this data set using simple linear regression, the equation of the straight line is: