Deck 4: Forecasting

Question 1

________ forecasts are concerned with rates of technological progress, which can result in the birth of exciting new products, requiring new plants and equipment.

Answer 1

Technological

Question 2

Demand forecasts serve as inputs to financial, marketing, and personnel planning.

Answer 2

True

Question 3

The three major types of forecasts used by organizations in planning future operations are:

A) strategic, tactical, and operational.
B) economic, technological, and demand.
C) exponential smoothing, Delphi, and regression.
D) causal, time-series, and seasonal.
E) departmental, organizational, and territorial.

Answer 3

B

Question 4

Very few forecasting techniques assume that there is some underlying stability in the system.

Question 5

A skeptical manager asks what long-range forecasts can be used for. Give her three possible uses/purposes.

Question 6

Which of the following most requires long-range forecasting (as opposed to short-range or medium-range forecasting) for its planning purposes?

A) job scheduling
B) production levels
C) cash budgeting
D) capital expenditures
E) purchasing

Question 7

Forecasts of individual products tend to be less accurate than forecasts of product families.

Question 8

Forecasts used for new product planning, capital expenditures, facility location or expansion, and R&D typically utilize a:

A) short-range time horizon.
B) medium-range time horizon.
C) long-range time horizon.
D) naive method, because there is no data history.
E) trend extrapolation.

Question 9

A forecast with a time horizon of about 3 months to 3 years is typically called a:

A) long-range forecast.
B) medium-range forecast.
C) short-range forecast.
D) weather forecast.
E) strategic forecast.

Question 10

As compared to long-range forecasts, short-range forecasts:

A) are less accurate.
B) deal with less comprehensive issues supporting management decisions.
C) employ similar methodologies.
D) all of these
E) none of these

Question 11

What two numbers are contained in the daily report to the CEO of Walt Disney Parks & Resorts regarding the six Orlando parks?

A) yesterday's forecasted attendance and yesterday's actual attendance
B) yesterday's actual attendance and today's forecasted attendance
C) yesterday's forecasted attendance and today's forecasted attendance
D) yesterday's actual attendance and last year's actual attendance
E) yesterday's forecasted attendance and the year-to-date average daily forecast error

Question 12

Forecasts may be influenced by a product's position in its life cycle.

Question 13

A skeptical manager asks what short-range forecasts can be used for. Give her three possible uses/purposes.

Question 14

Describe the three forecasting time horizons and their use.

Question 15

Short-range forecasts tend to ________ longer-range forecasts.

A) be less accurate than
B) be more accurate than
C) have about the same level of accuracy as
D) employ the same methodologies as
E) deal with more comprehensive issues than

Question 16

________ forecasts address the business cycle by predicting inflation rates, money supplies, housing starts, and other planning indicators.

Question 17

One use of short-range forecasts is to determine:

A) planning for new products.
B) cash budgeting.
C) research and development plans.
D) facility location.
E) production levels.

Question 18

Forecasts are usually classified by time horizon into which three categories?

A) short-range, medium-range, and long-range
B) finance/accounting, marketing, and operations
C) strategic, tactical, and operational
D) exponential smoothing, regression, and time series
E) departmental, organizational, and industrial

Question 19

List and briefly describe the three major types of forecasts that organizations use in planning future operations.

Question 20

What forecasting systems combine the intelligence of multiple supply chain partners?

A) FORE
B) MULTISUP
C) CPFR
D) SUPPLY
E) MSCP

Question 21

The sales force composite forecasting method relies on salespersons' estimates of expected sales.

Question 22

The forecasting technique that pools the opinions of a group of experts or managers is known as:

A) the expert judgment model.
B) multiple regression.
C) jury of executive opinion.
D) market survey.
E) management coefficients.

Question 23

Which of the following is NOT a step in the forecasting process?

A) Determine the use of the forecast.
B) Eliminate any assumptions.
C) Determine the time horizon of the forecast.
D) Select the forecasting model.
E) Validate and implement the results.

Question 24

A time-series model uses a series of past data points to make the forecast.

Question 25

Which of the following is NOT a type of qualitative forecasting?

A) jury of executive opinion
B) sales force composite
C) market survey
D) Delphi method
E) moving average

Question 26

What is the difference between an associative model and a time-series model?

Question 27

Identify the seven steps involved in forecasting.

Question 28

Name and discuss three qualitative forecasting methods.

Question 29

What are the three realities of forecasting that companies face?

Question 30

________ is a forecasting technique based upon salespersons' estimates of expected sales.

Question 31

What are the differences between quantitative and qualitative forecasting methods?

Question 32

The jury of executive opinion forecasting method formally solicits input from customers and potential customers.

Question 33

The quarterly "make meeting" of Lexus dealers is an example of a sales force composite forecast.

Question 34

________ forecasts use a series of past data points to make a forecast.

Question 35

Identify four quantitative forecasting methods.

Question 36

What is a time-series forecasting model?

Question 37

Which of the following uses three types of participants: decision makers, staff personnel, and respondents?

A) jury of executive opinion
B) sales force composite
C) Delphi method
D) associative models
E) time series

Question 38

The two general approaches to forecasting are:

A) qualitative and quantitative.
B) mathematical and statistical.
C) judgmental and qualitative.
D) historical and associative.
E) judgmental and associative.

Question 39

________ forecasts employ one or more mathematical models that rely on historical data and/or associative variables to forecast demand.

Question 40

Which of the following techniques uses variables such as price and promotional expenditures, which are related to product demand, to predict demand?

A) associative models
B) exponential smoothing
C) weighted moving average
D) moving average
E) trend projection

Question 41

A naive forecast for September sales of a product would be equal to the forecast for August.

Question 42

Mean squared error and exponential smoothing are two measures of the overall error of a forecasting model.

Question 43

The fundamental difference between cycles and seasonality is the:

A) duration of the repeating patterns.
B) magnitude of the variation.
C) ability to attribute the pattern to a cause.
D) all of the these
E) none of the these

Question 44

A trend projection equation with a slope of 0.78 means that there is a 0.78 unit rise in Y per period.

Question 45

In trend projection, a negative regression slope is mathematically impossible.

Question 46

In trend projection, the trend component is the intercept of the regression equation.

Question 47

Time-series data may exhibit which of the following behaviors?

A) trend
B) random variations
C) seasonality
D) cycles
E) They may exhibit all of these.

Question 48

Seasonal indices adjust raw data for patterns that repeat at regular time intervals.

Question 49

Cycles and random variations are both components of time series.

Question 50

What is the forecast for May using a four-month moving average?

A) 38
B) 42
C) 43
D) 44
E) 47

Question 51

Gradual upward or downward movement of data over time is called:

A) seasonality.
B) a cycle.
C) a trend.
D) exponential variation.
E) random variation.

Question 52

Which time-series model below assumes that demand in the next period will be equal to the most recent period's demand?

A) naive approach
B) moving average approach
C) weighted moving average approach
D) exponential smoothing approach
E) trend projection

Question 53

In time series, which of the following CANNOT be predicted?

A) large increases in demand
B) cycles
C) seasonal fluctuations
D) random variations
E) large decreases in demand

Question 54

One advantage of exponential smoothing is the limited amount of record keeping involved.

Question 55

Demand for individual products can be driven by product life cycles.

Question 56

The larger the number of periods in the simple moving average forecasting method, the greater the method's responsiveness to changes in demand.

Question 57

The major components of a time series are all of the following EXCEPT:

A) seasonality.
B) inflation.
C) trend.
D) cycles.
E) random variations.

Question 58

Trend refers to a data pattern that repeats itself after a period of days, weeks, months, or quarters.

Question 59

Which of the following statements about time-series forecasting is TRUE?

A) It is always based on the assumption that future demand will be the same as past demand.
B) It makes extensive use of the data collected in the qualitative approach.
C) It is based on the assumption that the analysis of past demand helps predict future demand.
D) Because it accounts for trends, cycles, and seasonal patterns, it is always more powerful than associative forecasting.
E) All of these are true.

Question 60

A naive forecast for September sales of a product would be equal to the sales in August.

Question 61

Yamaha manufactures which set of products with complementary demands to address seasonal variations?

A) golf clubs and skis
B) swimming suits and winter jackets
C) jet skis and snowmobiles
D) pianos and guitars
E) ice skates and water skis

Question 62

Which of the following is TRUE regarding the two smoothing constants of the Forecast Including Trend (FIT) model?

A) One constant is positive, while the other is negative.
B) They are called MAD and cumulative error.
C) Alpha is always smaller than beta.
D) One constant smooths the regression intercept, whereas the other smooths the regression slope.
E) Their values are determined independently.

Question 63

Which time-series model uses BOTH past forecasts and past demand data to generate a new forecast?

A) naive
B) moving average
C) weighted moving average
D) exponential smoothing
E) trend projection

Question 64

A six-month moving average forecast is generally better than a three-month moving average forecast if demand:

A) is rather stable.
B) has been changing due to recent promotional efforts.
C) follows a downward trend.
D) exceeds one million units per year.
E) follows an upward trend.

Question 65

Which of the following smoothing constants would make an exponential smoothing forecast equivalent to a naive forecast?

A) 0
B) 1 divided by the number of periods
C) 0.5
D) 1.0
E) cannot be determined

Question 66

A forecast based on the previous forecast plus a percentage of the forecast error is a(n):

A) qualitative forecast.
B) naive forecast.
C) moving average forecast.
D) weighted moving average forecast.
E) exponential smoothing forecast.

Question 67

A time-series trend equation is 25.3 + 21x. What is your forecast for period 7?

A) 324.1
B) 25.3
C) 32.3
D) 40.0
E) 172.3

Question 68

Which time-series model below assumes that demand in the next period will be equal to the most recent period's forecast?

A) naive approach
B) moving average approach
C) weighted moving average approach
D) exponential smoothing approach with α = 0
E) trend projection

Question 69

Which of the following is NOT a characteristic of exponential smoothing?

A) smooths random variations in the data
B) uses an easily altered weighting scheme
C) weights each historical value equally
D) has minimal data storage requirements
E) uses the previous period's forecast

Question 70

For a given product demand, the time-series trend equation is 53 - 4x. The negative sign on the slope of the equation:

A) is a mathematical impossibility.
B) is an indication that the forecast is biased, with forecast values lower than actual values.
C) is an indication that product demand is declining.
D) implies that the coefficient of determination will also be negative.
E) implies that the cumulative error will be negative.

Question 71

The primary purpose of the mean absolute deviation (MAD) in forecasting is to:

A) estimate the trend line.
B) eliminate forecast errors.
C) measure forecast accuracy.
D) seasonally adjust the forecast.
E) remove random variations.

Question 72

Which of the following values of alpha would cause exponential smoothing to respond the QUICKEST to changes in demand data?

A) 0.10
B) 0.2246
C) 0.50
D) 0.90
E) cannot be determined

Question 73

Increasing the number of periods in a moving average will accomplish greater smoothing, but at the expense of:

A) manager understanding.
B) accuracy.
C) stability.
D) sensitivity to real changes in the data.
E) All of the these are diminished when the number of periods increases.

Question 74

Given an actual demand this period of 67, a forecast for this period of 58, and an alpha of 0.3, what would the forecast for the next period be using exponential smoothing?

A) 55.3
B) 57.1
C) 58.9
D) 61.0
E) 60.7

Question 75

Suppose that the last four months of sales were 8, 10, 15, and 9 units, respectively. Suppose further that the last four forecasts were 5, 6, 11, and 12 units, respectively. What is the Mean Absolute Deviation (MAD) of these forecasts?

A) 2
B) -10
C) 3.5
D) 9
E) 10.5

Question 76

John's House of Pancakes uses a weighted moving average method to forecast pancake sales. It assigns a weight of 5 to the previous month's demand, 3 to demand two months ago, and 1 to demand three months ago. If sales amounted to 3000 pancakes in May, 2200 pancakes in June, and 1000 pancakes in July, what should be the forecast for August?

A) 2400
B) 2511
C) 2067
D) 3767
E) 1622

Question 77

Given an actual demand this period of 103, a forecast value for this period of 99, and an alpha of .6, what is the exponential smoothing forecast for next period?

A) 96.6
B) 97.4
C) 100.6
D) 101.4
E) -105.4

Question 78

Which of the following statements comparing exponential smoothing to the weighted moving average technique is TRUE?

A) Exponential smoothing is more easily used in combination with the Delphi method.
B) More emphasis can be placed on recent values using the weighted moving average.
C) Exponential smoothing is considerably more difficult to implement on a computer.
D) Exponential smoothing typically requires less record keeping of past data.
E) Exponential smoothing allows one to develop forecasts for multiple periods, whereas the weighted moving average technique does not.

Question 79

Given forecast errors of -1, 4, 4, and -3, what is the mean absolute deviation?

A) 1
B) 3
C) 4
D) 8
E) 12

Question 80

A forecasting method has produced the following over the past five months. What is the mean absolute deviation?

A) -0.2
B) 12.0
C) 6.0
D) 1.2
E) 2.4