Deck 3: Forecasting

Question 1

The naive forecast can serve as a quick and easy standard of comparison against which to judge the cost and accuracy of other techniques.

Answer 1

True

Question 2

Forecasts based on time series (historical) data are referred to as associative forecasts.

Answer 2

False

Question 3

Forecasts help managers plan both the system itself and provide valuable information for using the system.

Answer 3

True

Question 4

Forecasting techniques that are based on time series data assume that future values of the series will duplicate past values.

Question 5

Trend adjusted exponential smoothing uses double smoothing to add twice the forecast error to last period's actual demand.

Question 6

Forecasts for groups of items tend to be less accurate than forecasts for individual items because forecasts for individual items don't include as many influencing factors.

Question 7

Once accepted by managers, forecasts should be held firm regardless of new input since many plans have been made using the original forecast.

Question 8

The Delphi approach involves the use of a series of questionnaires to achieve a consensus forecast.

Question 9

The naive forecast is limited in its application to series that reflect no trend or seasonality.

Question 10

The purpose of the forecast should be established first so that the level of detail, amount of resources, and accuracy level can be understood.

Question 11

A consumer survey is an easy and sure way to obtain accurate input from future customers since most people enjoy participating in surveys.

Question 12

Exponential smoothing adds a percentage (called alpha) of last period's forecast to estimate next period's demand.

Question 13

Forecasting techniques generally assume an existing causal system that will continue to exist in the future.

Question 14

For new products in a strong growth mode, a low alpha will minimize forecast errors when using exponential smoothing techniques.

Question 15

The shorter the forecast period, the more accurately the forecasts tend to track what actually happens.

Question 16

When new products or services are introduced, focus forecasting models are an attractive option.

Question 17

Time series techniques involve identification of explanatory variables that can be used to predict future demand.

Question 18

Organizations that are capable of responding quickly to changing requirements can use a shorter forecast horizon and therefore benefit from more accurate forecasts.

Question 19

Forecasts based on an average tend to exhibit less variability than the original data.

Question 20

The naive approach to forecasting requires a linear trend line.

Question 21

In exponential smoothing, an alpha of 1.0 will generate the same forecast that a naïve forecast would yield.

Question 22

An advantage of a weighted moving average is that recent actual results can be given more importance than what occurred a while ago.

Question 23

A forecast method is generally deemed to perform adequately when the errors exhibit an identifiable pattern.

Question 24

An advantage of "trend adjusted exponential smoothing" over the "linear trend equation" is its ability to adjust over time to changes in the trend.

Question 25

The sample standard deviation of forecast error is equal to the square root of MSE.

Question 26

Correlation measures the strength and direction of a relationship between variables.

Question 27

If a pattern appears when a dependent variable is plotted against time, one should use time series analysis instead of regression analysis.

Question 28

In order to update a moving average forecast, the values of each data point in the average must be known.

Question 29

Curvilinear and multiple regression procedures permit us to extend associative models to relationships that are non-linear or involve more than one predictor variable.

Question 30

Forecasts of future demand are used by operations people to plan capacity.

Question 31

Trend adjusted exponential smoothing requires selection of two smoothing constants.

Question 32

In order to compute seasonal relatives, the trend of past data must be computed or known which means that for brand new products this approach can't be used.

Question 33

A smoothing constant of .1 will cause an exponential smoothing forecast to react more quickly to a sudden change than a smoothing constant value of .3.

Question 34

The T in the model TAF = S+T represents the time dimension (which is usually expressed in weeks or months).

Question 35

A moving average forecast tends to be more responsive to changes in the data series when more data points are included in the average.

Question 36

A seasonal relative (or seasonal indexes) is expressed as a percentage of average or trend.

Question 37

Exponential smoothing is a form of weighted averaging.

Question 38

A control chart involves setting action limits for cumulative forecast error.

Question 39

MAD is equal to the square root of MSE which is why we calculate the easier MSE and then calculate the more difficult MAD.

Question 40

Removing the seasonal component from a data series (de-seasonalizing) can be accomplished by dividing each data point by its appropriate seasonal relative.

Question 41

Forecasts based on judgment and opinion don't include

A)executive opinion
B)salesperson opinion
C)second opinions
D)customer surveys
E)Delphi methods

Question 42

Forecasting techniques such as moving averages, exponential smoothing, and the naive approach all represent smoothed (averaged) values of time series data.

Question 43

The best forecast is not necessarily the most accurate.

Question 44

Minimizing the sum of the squared deviations around the line is called:

A)mean squared error technique
B)mean absolute deviation
C)double smoothing
D)least squares estimation
E)predictor regression

Question 45

Which of the following features would not generally be considered common to all forecasts?

A)Assumption of a stable underlying causal system.
B)Actual results will differ somewhat from predicted values.
C)Historical data is available on which to base the forecast.
D)Forecasts for groups of items tend to be more accurate than forecasts for individual items.
E)Accuracy decreases as the time horizon increases.

Question 46

In exponential smoothing, an alpha of .30 will cause a forecast to react more quickly to a large error than will an alpha of .20.

Question 47

Which of the following would be an advantage of using a sales force composite to develop a demand forecast?

A)The sales staff is least affected by changing customer needs.
B)The sales force can easily distinguish between customer desires and probable actions.
C)The sales staff is often aware of customers' future plans.
D)Salespeople are least likely to be influenced by recent events.
E)Salespeople are least likely to be biased by sales quotas.

Question 48

Simple linear regression applies to linear relationships with no more than three independent variables.

Question 49

Bias exists when forecasts tend to be greater or less than the actual values of time series.

Question 50

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

A)determine the purpose and level of detail required
B)eliminate all assumptions
C)establish a time horizon
D)select a forecasting model
E)monitor the forecast

Question 51

Bias is measured by the cumulative sum of forecast errors.

Question 52

In business, forecasts are the basis for:

A)capacity planning
B)budgeting
C)sales planning
D)production planning
E)all of the above

Question 53

An important goal of forecasting is to minimize the average forecast error.

Question 54

The two general approaches to forecasting are:

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

Question 55

Which of the following is not a type of judgmental forecasting?

A)executive opinions
B)sales force opinions
C)consumer surveys
D)the Delphi method
E)time series analysis

Question 56

A proactive approach to forecasting views forecasts as probable descriptions of future demand, and requires action to be taken to meet that demand.

Question 57

A tracking signal focuses on the ratio of cumulative forecast error to the corresponding value of MAD.

Question 58

Accuracy in forecasting can be measured by:

A)MSE
B)MRP
C)MAPE
D)MTM
E)A & C

Question 59

Seasonal relatives can be used to de-seasonalize data or incorporate seasonality in a forecast.

Question 60

The use of a control chart assumes that errors are normally distributed about a mean of zero.

Question 61

Given an actual demand of 59, a previous forecast of 64, and an alpha of .3, what would the forecast for the next period be using simple exponential smoothing?

A)36.9
B)57.5
C)60.5
D)62.5
E)65.5

Question 62

Gradual, long-term movement in time series data is called:

A)seasonal variation
B)cycles
C)irregular variation
D)trend
E)random variation

Question 63

Which phrase most closely describes the Delphi technique?

A)associative forecast
B)consumer survey
C)series of questionnaires
D)developed in India
E)historical data

Question 64

The primary difference between seasonality and cycles is:

A)the duration of the repeating patterns
B)the magnitude of the variation
C)the ability to attribute the pattern to a cause
D)the direction of the movement
E)there are only 4 seasons but 30 cycles

Question 65

One reason for using the Delphi method in forecasting is to:

A)avoid premature consensus (bandwagon effect)
B)achieve a high degree of accuracy
C)maintain accountability and responsibility
D)be able to replicate results
E)prevent hurt feelings

Question 66

Which is not a characteristic of exponential smoothing?

A)smoothes random variations in the data
B)weights each historical value equally
C)has an easily altered weighting scheme
D)has minimal data storage requirements
E)smoothes real variations in the data

Question 67

Which of the following possible values of alpha would cause exponential smoothing to respond the most quickly to forecast errors?

A)0
B).01
C).05
D).10
E).15

Question 68

Given an actual demand of 105, a forecasted value of 97, and an alpha of .4, the simple exponential smoothing forecast for the next period would be:

A)80.8
B)93.8
C)100.2
D)101.8
E)108.2

Question 69

Putting forecast errors into perspective is best done using

A)Exponential smoothing
B)MAPE
C)Linear decision rules
D)MAD
E)Hindsight

Question 70

Simple exponential smoothing is being used to forecast demand.The previous forecast of 66 turned out to be four units less than actual demand.The next forecast is 66.6, implying a smoothing constant, alpha, equal to:

A).01
B).10
C).15
D).20
E).60

Question 71

Which is not a characteristic of simple moving averages applied to time series data?

A)smoothes random variations in the data
B)weights each historical value equally
C)lags changes in the data
D)requires only last period's forecast and actual data
E)smoothes real variations in the data

Question 72

Averaging techniques are useful for:

A)distinguishing between random and non-random variations
B)smoothing out fluctuations in time series
C)eliminating historical data
D)providing accuracy in forecasts
E)average people

Question 73

Moving average forecasting techniques do the following:

A)immediately reflect changing patterns in the data
B)lead changes in the data smooth variations in the data
D)operate independently of recent data
E)assist when organizations are relocating

Question 74

Detecting non-randomness in errors can be done using:

A)MSEs
B)MAPs
C)Control Charts
D)Correlation Coefficients
E)Strategies

Question 75

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

A)0
B).01
C).1
D).5
E)1.0

Question 76

Using the latest observation in a sequence of data to forecast the next period is:

A)a moving average forecast
B)a naive forecast
C)an exponentially smoothed forecast
D)an associative forecast
E)regression analysis

Question 77

The forecasting method which uses anonymous questionnaires to achieve a consensus forecast is:

A)sales force opinions
B)consumer surveys
C)the Delphi method
D)time series analysis
E)executive opinions

Question 78

In order to increase the responsiveness of a forecast made using the moving average technique, the number of data points in the average should be:

A)decreased
B)increased
C)multiplied by a larger alpha
D)multiplied by a smaller alpha
E)eliminated if the MAD is greater than the MSE

Question 79

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

A)a naive forecast
B)a simple moving average forecast
C)a centered moving average forecast
D)an exponentially smoothed forecast
E)an associative forecast

Question 80

For the data given below, what would the naive forecast be for the next period (period #5)?

A)58
B)62
C)59.5
D)61
E)cannot tell from the data given