Posted on by Judy

A ski repair shop at a resort in Colorado sells replacement poles each season. The shop needs to develop a forecast of next season’s sales so that they can place an order for poles with their supplier well in advance of the beginning of the season. Sales data for the past five years are shown below. Compare the forecasts given by the following models. Year: 1 2 3 4 5 Sales (units): 350 375 355 375 390 Develop forecasts using: A 5 year moving average. A weighted moving average model with weights of 0.2, 0.2, 0.1, 0.3, and 0.2 for years 1 through 5 respectively. An exponential smoothing model with year 1 forecast of 380 and α= 0.3.

Five period moving average:
Five period moving average is the average of previous five period actual data.
Forecast for year 6 = (350+375+355+375+390)/5 = 1845/5 = 369
Weighted moving average :
Forecast for year 6 = 0.2*350 + 0.2*375 + 0.1*355 + 0.3*375 + 0.2*390
= 70+75+35.5+112.5+78 = 371
Forecast for year 6 using Weighted moving average = 371
Exponential smoothing Ft
F_{t}=F_{t-1}+alpha (A_{t-1}-F_{t-1})
Ft = new forecast
Ft-1 = previous period forecast
At-1 = Previous period actual demand
alpha = smoothing constant
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